Cancelling transfer orders in Dynamics 365 Finance and Operations

Updated: January 26, 2026

Jay Yadavalli Functional Architect

Although the ability to cancel shipped transfer orders was introduced in November 2020 (D365 FO version 10.0.13, Update 37), the process remains unchanged today. If items are shipped by mistake, you can still navigate to Transfer Order History and select Cancel on the shipment record; there is no need to complete the original transfer order and create a new one to reverse it.

Here are step-by-step instructions on how to cancel transfer orders in Dynamics 365 FO that have been shipped by mistake

First, if not done already, this functionality needs to be enabled through the ‘Feature Management’ workspace.

Figure 1: Feature Management for Transfer Order Cancelation

The steps for canceling a Transfer Order are defined below:

1. Create and ship a Transfer order

Create a Transfer Order to Ship from Warehouse 51 to 61.

Note: 55 is the Transit warehouse

Figure 2: Transfer order screen

  • Pick the Items to be shipped

Figure 3: Inventory Transaction after Item has been picked

The transaction status for the items in warehouse 51 is 'Picked'.

  • Ship the Transfer order
    The Transfer order status changes to ‘Shipped’

Figure 4: Transfer order status after the order is shipped

The transaction for the transfer order line show that the item has been sold to warehouse 51 and is now in the transit warehouse 55.

Figure 5: Inventory transactions after an order has shipped

2. Cancel Transfer order

For a transfer order which has shipped, click on the Transfer order history button.

Figure 6: Transfer order history button

On the Transfer order history button, a ‘Cancel’ button is available.

Figure 7: Cancel button

When the user clicks on ‘Cancel’ button they will get a message asking them to confirm.

Figure 8: Confirmation message during cancelation

When the user clicks on ‘Yes’ the transactions are reversed and a new record is created in the Transfer Order history showing the reversals.

Figure 9: Transfer order history showing canceled order

The status of the transfer order is set back to ‘Created.’

Figure 10: Transfer order status after reversal

The transactions are all reversed and the inventory from the transit warehouse is sold back to the ‘from warehouse’.

Figure 11: Inventory transaction after reversal

That’s it, you’ve successfully cancelled the transfer order. For more details on cancelling transfer orders, see our FAQs below.

Cancelling transfer orders FAQs

  • Q: Can I just cancel a single item that was shipped by mistake?
    • A: No. You would need to cancel the whole shipment as the ability to cancel a single item does not exist.
  • Q: Do I need to enable a feature to cancel transfer orders?
    • A: Yes, via Feature Management. (See figure 1 in this article.)
  • Q: Which versions of D365 FO support transfer order cancellation?
    • A: This feature switch is available in version 10.0.13 and later.
  • Q: Can I cancel a transfer order after it’s invoiced?
    • A: No, cancellation is only possible before invoicing.
  • Q: What happens to inventory when a transfer order is canceled?
    • A: Inventory is reversed back to the original warehouse.
  • Q: Is there an audit trail for canceled transfer orders?
    • A: Yes, you can view cancellation history in Transfer Order History.
  • Q: Can I cancel multiple transfer orders at once?
    • A: No, cancellation is done individually, per order.
  • Q: Is the cancel transfer order compatible with advanced warehouses?
    • A: No, D365 does not allow cancellation of transfer orders when using an advanced warehouse.