Using Project Categories

The School of Athens by Raphael

There are Ten Categories of Being: Substance, Quantity, Quality, Relative, Place, Time, Position, Having, Acting upon, Being affected.

~Aristotle

Is that MECE?

~Literally every management consultant, ever.


How many project categories do I need?” is a common D365 implementation question. Remembering the rules from our initial project categories post, a project category can be of only one transaction type – so you will need at least one project category group for each transaction type used and at least one project category within each project category group.

Below is a survey of places where project categories are used in D365 for Finance and Operations. The list is not exhaustive, and project categories are not the only drivers of the below (for instance, there are many attributes that can be used to drive sales prices), but the below can be a good starting point for thinking about how granularly an organization’s project categories ought to be defined.

Ledger Posting Setup

Project and category relationships are the two main drivers of both cost and revenue account posting profiles in the Project management and accounting module.

Sales prices

Hour, Expense, and Fee transaction types all have their own sales price tables. Sales prices for items are set through trade agreements. Project category is one of many attributes that can be used to drive sales prices.

Cost prices

While it is more common for cost prices to be driven at the resource or role level, specific cost prices can also be set at the project category level.

Line property defaults

Line property default behaviors are configured on the project/group line properties table. For some organizations, it makes sense to have billable and non-billable expense categories instead of having users directly select the line property on their expense report lines.

Expense category attributes

Different expense types have different attributes – for instance, an expense type of mileage requires a number of miles to be entered on the expense report, calculating a reimbursement amount, instead of allowing the user to directly enter their mileage expense reimbursement amount.

Expense policies

Different company expense policies can be applied specifically to project categories of certain expense types.

Indirect costs

If using indirect costing, indirect cost components need to be associated to an indirect cost project category. Less frequently used, project categories can be used to drive whether indirect costs are applied through the Indirect cost component group assignment rules configuration.

Item sales tax groups

Different sales tax codes apply to different goods and services. In D365, this sales tax configuration is applied through the item sales tax group on the project category.

Posted transaction reporting

Whether viewing posted transactions in D365 or an external reporting solution, project category can be an important reporting dimension. In the image above, the hours transactions form is grouped by project category.

Project forecast reporting

As with posted transactions, project categories can be a useful dimension for project forecast reporting. Sometimes forecasting is done at a more general level of project category than those anticipated for posting. (For example, an “Expense forecast” project category may be used to estimate all the different expense postings anticipated on a project)

Project invoice document

Project categories display on the project invoice document – which makes sense especially if sales prices are being driven by project categories. That being the case, it is worth considering what customers would like to see related to the project categories displayed.


Do you see an important project category function missing from the list above? Call it out in the comments!

Understanding Project Categories

The School of Athens by Raphael

Fun fact: Aristotle thought there were ten categories.
Possibly related fact: Aristotle never used the D365 Projects Module.


Project categories are not a new concept in D365. A quick search will show that categories date back at least to AX2012, and perhaps even time immemorial. The latest project category documentation (see here, here, or here) is 5+ years old – more ancient than Aristotle in tech-years.

Why do I think I can explain an old topic any better than it’s already been explained? Aristotle would call this Hubris.


What Are Project Categories?

Understanding project categories requires knowing a few D365 projects module rules:

  • Cost or revenue associated with a project must be defined by a project category.
  • A project category can only be of one transaction type (Hour, Expense, Item, Fee).
  • A project category can only be used within its own legal entity.
  • To work with the Expense module, a Project category needs to be setup as an Expense category.
  • To work with the production module, a Project category needs to be setup as a Cost category.

These rules lead to a D365 category table structure that looks like this:

Why so complicated? The complexity comes from the rules…let’s examine.

1) Category group

Category groups…groups categories! Project categories can only have one transaction type, and the category group is where the category’s transaction type is defined. All project categories in the same category group will be of the same transaction type.

2) Shared category

Because a project category can be used only within its own legal entity, the concept of a global “shared category” exists in D365 to link project categories across different legal entities. The shared category is also where the category’s identity as a “Project category” for use in the Project management and accounting module is defined. The Shared category is also where a category’s use in the Production or Expense management modules is defined if applicable.

3) Project category

Once a category group and shared category have been setup, the project category can be created. When creating a new project category on the project category form, the category ID dropdown will show all shared categories not yet associated to project categories in the current legal entity. Notice that Category group is a required field for the project category, and that selecting the category group sets the project category’s transaction type.

4) Production category

When “Use in production” is enabled on the Shared category, the associated Project category is also setup as a Cost category. An additional fastab related to Production attributes is displayed on the project category (this additional production information is stored on the Cost Category table). The category is also visible in the production module. This is the same category record information, just viewed from a filtered list of categories used in production.

5) Expense category

When “Use in expense” is enabled on the Shared category, the associated Project category is also setup as an Expense category. Two additional fastabs related to expense attributes are displayed on the project category (this additional information is stored on the expense category table), and the category is also visible in the Expense management module. Like the Cost category, the Expense category record in Expense management displays its same record information as in the Project category list.


As you can see, setting up a new Project category is as easy as 1, 2, 3 (configurations for Category groups, Shared categories, and Project categories)…and possibly 4 or 5 (additional configurations for Cost categories or Expense categories, if applicable). In a future post, I plan to look at different results that can be driven by Project categories, as well as how to efficiently upload Project categories through data management.