Automate with precision: The role of financial tags and default rules in Dynamics 365 Finance

Modern finance teams are under growing pressure to do more with their data. As transactions become complex, so does the need for better traceability, richer context, and smarter reporting. Traditional financial structures in Microsoft Dynamics 365 Finance offer tools like financial dimensions. Still, those tools alone aren’t always enough for users who need more flexibility, fewer constraints, and deeper insight at the transaction level.

That’s where the financial tags come in. Introduced as a new capability in Dynamics 365 Finance, financial tags allow users to assign up to 20 customizable values to transactional records, unlocking more granular visibility without the rigidity of predefined account structures. These tags aren’t just visible when posting and carrying through voucher transactions; they also enable more intuitive filtering and data exploration.

In this blog, we’ll explore how D365 financial tags work, how they differ from traditional financial dimensions, and how to configure them. We’ll also discuss automation through default rules that can save time and improve consistency across your financial operations.

What are financial tags in Dynamics 365 Finance?

Financial tags in Dynamics 365 Finance are a powerful feature that lets you add up to 20 user-defined fields to transactions for enhanced tracking and reporting, without modifying your chart of accounts or financial dimensions.
Financial tags are lightweight, flexible labels you can attach to transactions (like journal entries, invoices, or payments) to capture extra context, such as:

• Sales order numbers
• Vendor or customer names
• Campaign codes
• Internal project references

They’re especially useful for internal analysis, audit trails, and ad hoc reporting.

Financial tags vs financial dimensions: What’s the difference?

A common misconception among Dynamics 365 users is that financial tags D365 function similarly to financial dimensions. While both tools help categorize and track financial data, they serve different purposes and behave differently in the system. Understanding the distinction between financial tags vs financial dimensions is key to using each effectively and avoiding misconfigurations, and some of these are listed below:

Financial Dimensions	Financial Tags
Must be included in account structures or advanced rules to be functional.	Not tied to account structures, offering more flexibility and fewer validation constraints.
Undergo validation during accounting entry based on active status and structure rules.	Not subject to structural validations during entry, making them easier to apply.
It is not supported in dimension sets or trial balances but is visible in separate voucher columns, which is ideal for filtering transactions.	Values of financial tags in D365 can be edited or removed even after posting.
Useful in financial dimension sets and compatible with Management Reporter for detailed financial reporting.	It cannot be associated with master data; it is applied at the journal header level and can default to lines.
Requires maintenance mode to activate new dimensions.	Values of financial tags in D365 can be edited or removed even after posting.
Once a transaction is posted, dimension values cannot be changed.	Values of financial tags in D365 can be edited or removed even after posting.

Configuring financial tags in D365 Finance: Step-by-step guide

Setting up financial tags in D365 Finance is a straightforward process, but it requires a few key steps to ensure proper functionality. Follow this guide to enable the feature, define tag behavior, and make them available across your journals.

Step 1:

First, navigate to the feature management and enable the “Financial Tags” feature.

Step 2:

We need to add a delimiter that separates each financial tag from the others. This will be defined in the General Ledger parameters > Financial Tags Tab.

Note: Choose this delimiter wisely because it can’t be used in the Financial Tag values, which we will explore further in later parts of this blog.

Step 3:

We are all set to create the D365 F&O financial tags.

Navigate to General Ledger > Chart of Accounts > Financial Tags > Financial Tags.

Step 4:

Click on the New button to create a new financial tag in Dynamics 365 Finance and Operations.

Step 5:

Fill in the Name of the financial tag in the field “Financial tag”.

Step 6:

Select the correct Value Type. This defines the type of values for the financial tags that will be available for the user’s selection.

We have the following options available:

• Text: The user can type any desired value in the field without restrictions.
• List: If this option has been selected, we need to define the entity in the Use Values from field so that relevant options, such as Bank Account Names, Business Units, Customer accounts, customer groups, fixed asset numbers, item groups, etc., are only available for selection.

• Custom List: Under this option, we can define a custom list as tag values so that users can specifically choose from the custom list only.

To define the custom list for selection, click the Tag Values button.

Step 7:

Define the values that you require for your custom list.

Step 8:

To make the financial tags visible or available, click the Activate or Deactivate tags, move the required dimensions to the Active financial tags section, and click OK.

Once the batch job is ended, you will see the previously selected financial tags as Active.

Walkthrough: Using financial tags in a vendor invoice journal

Once your financial tags are configured and activated, you can apply them during transaction entry. Here’s how to test them using a vendor invoice journal:

Step 1:

For demonstration purposes, create the following three financial tags:

Financial Tag	Value Type	Use Values from
DepartmentTag	Custom List
Campaign	Text
FixedAsset	List	Fixed Asset Number

Step 2:

When posting the Vendor Invoice journal, you would see the financial tags and the offset financial tags fields for the information to be filled in.

Step 3:

Once click on the drop-down, you will see the active financial tags and the allowed tag values for each financial tag. The user can select the required financial tag values that need to be tagged with the Invoice journal

Step 4:

Alternatively, you can define the financial tag values on the header level and populate them on all the subsequent lines.

Step 5:

Post the vendor invoice journal.

Step 6:

Let’s check the voucher together.

Here, you will observe that financial tags have also been tagged with the posted financial voucher.

Step 7:

Next, once the “Enable financial tags for Accounting Source Explorer” feature is enabled, you can find these financial tags in the Accounting Source Explorer.

Step 8:

You can explore the accounting source explorer for the earlier posted expense account and check whether these financial tags are available there.

Step 9:

We have confirmed that financial tags and their relevant values are also available in the accounting source explorer.

Editing financial tag values after posting

One advantage of using these financial tags in Dynamics 365 is that you can edit them even after the voucher has been posted. Assume you mistakenly selected the wrong financial tag values when posting the journal or invoicing the purchase order. If these were the financial dimensions, you would probably have reversed the journal and reposted it, but this is not true with financial tags.

To correct any financial tag values, you need to follow the steps:

Step 1:

You can navigate to the Voucher Transactions.

Step 2:

Select the relevant voucher and click OK to view the specific voucher transaction.

Step 3:

Select the transaction/transactions and click on the Edit voucher.

Step 4:

Then select the option “Edit internal voucher data”.

Step 5:

Now, fill in the following information:

• In the field “New financial tags,” select the new / required financial dimension. In our case, we have changed the DepartmentTag from “Finance” to “Human Resources”.
• Write the reason for the changes in the “Reason for edit” text box. In our case, it’s “Wrong Department selected”.

Step 6:

Finally, click the OK button.

You will notice that the financial tag values have been changed as per the desired values.

Automating tag values with financial tag rules in D365 Finance

To simplify data entry and improve consistency, Microsoft Dynamics 365 Finance (as of version 10.0.42) introduces Financial Tag Rules (preview). This feature enables an automatic population of tag values based on user-defined conditions, no need for manual selection or Power FX coding.

Let’s walk through how to configure these rules using the built-in rule builder and test their functionality using a real-world scenario.

Supported transaction types (as of version 10.0.42)

Financial Tag Rules currently work with:

• General journal
• Allocation journal
• Reporting currency adjustment journal
• Vendor invoice journal

Scenario or the test case

We will now be setting up the financial tag rules as per the following criteria:

• If the Business Unit = 003 or 004, then the DepartmentTag should be “Consulting”; otherwise, the DepartmentTag should be “Finished Goods”
• If the Currency is “USD,” then the OrderLocation should be “Local.” If the currency is “EUR,” then the OrderLocation should be “Europe.” Otherwise, the OrderLocation financial tag should be “Rest of the world.”

Real-world use case: Configuring financial tag rules

Step 1:

Navigate to the General Ledger > Chart of Accounts > Financial Tags > Financial tag rules (preview).

Step 2:

Click on “New” to create a new financial tag rule.

Step 3:

Select or define the following data on the financial tag rule setup page:

• Name: This is the name you want to assign to this rule.
• Enable: If we want to activate the rule as soon as your setup gets completed, then set this option to “Yes”.
• Overwrite existing value: If you want this rule to override the existing values selected in the journals, set this option to “Yes.” Otherwise, let it be set to “No.”
• Transaction entry point: Select the document where this rule will apply, such as the General journal, allocation journal, reporting currency adjustment journal, or vendor invoice journal.
• Transaction level: We can define our financial tag rule for one or more of the following, turn by turn:
  • Header (Here we can define the rule based on the Journal batch number)
  • Account (Here we can define the rule for the financial tags)
  • Offset account (Here we can define the rule for the offset financial tags)
• Target: This requires us to define the relevant or targeted Financial Tag to which the rule will be applied.

Step 4:

Let’s set up the rule by clicking on the “Conditions”.

Step 5:

Click on the “New Condition”.

Step 6:

To comply with our test case scenario, set the rules with the following conditions:

• Rule 1

If Business Unit is 003 or Business Unit is 004, then the target value’s custom text is “Consulting”; else, the value of the financial tag should be “Finished Goods”

• Rule 2
  • If Currency = USD, then OrderLocation should be “Local”
  • If Currency = EUR, then OrderLocation should be “Europe”
  • Else the OrderLocation should be “Rest of the World”

Step 7:

Now, we can create and post a Vendor Invoice Journal to validate whether our financial tag rules are working perfectly.

Note: Ensure that your financial rule is enabled to apply to our Vendor Invoices.

Step 8:

Now, we will create an invoice journal and set the Currency to USD first. You will notice that “Local” is selected. On the other hand, we will leave the Business Unit financial dimension blank so that “Finished Goods” is selected for the DepartmentTag.

Step 9:

Now, we will change the Currency to “EUR,” which must fetch “Europe” as the tag value for OrderLocation. Then, we will select the Business Unit as 003 so that DepartmentTag automatically selects ” Consulting.”

So we noticed that the value populated in the Financial tags field “Europe_Consulting” is the same as per the criteria of our financial tag rules in Microsoft Dynamics 365.

Conclusion

Leveraging financial tags and automation rules in Microsoft Dynamics 365 Finance opens the door to more agile, accurate, and insightful financial operations. By moving beyond traditional dimensions, organizations can reduce reliance on rigid structures, streamline journal processing, and enhance data traceability, without compromising control.

At Confiz, we’ve helped finance teams implement and scale financial tagging strategies that simplify reporting and enable automation through rule-based defaults. A well-planned approach is key, whether you’re just starting out or looking to optimize existing processes.

Need expert guidance on setting up financial tags or automating tag logic in D365? Contact us at marketing@confiz.com. We are here to help you drive efficiency and unlock better financial insight.