If you are setting up item model groups there is a parameter called physical negative inventory. It is something you want to consider carefully if you want to allow the system to go into negative inventory as it will have an effect on your order and fulfillment processes, planning and costing for example. In this video let’s have a look at enabling it and the initial difference on registering a pick with it turned on and off.
Here is a quick overview.
D365FO 1611 – Update3 (7.0.4307.16141)
In follow-up posts we’ll have a look at the effects in more on different processes.
Cheers
Lachlan
OrganicAX 
Yes It is very Important. Also, Financial negative inventory check box below the same.
We can keep this check box true (Financial negative inventory) but physical Negative if checked true, it can create huge impact on Client’s Inventory.
Reconciliation also will be very difficult as well Costing (Closing).
Nice explanation in Video.
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