What is a Goods Received Note (GRN)?

When an invoice appears in your accounting system, how do you confirm the products have actually reached the warehouse? Without continuous delivery tracking, the accounts receivable specialist must check emails and contact warehouse staff. It slows down the approval procedure, delays transactions, and boosts the risk of errors. In this case, your company may be unprepared for audits. The solution lies in using a Goods Received Note (GRN).

It confirms that products were delivered in the correct quantity and undamaged. The article will explain: What does GRN stand for? Also, we’ll uncover all the aspects of working with the document.

Definition of Goods Received Note

In simple terms, a goods received note is a document prepared by a company’s receiving team to confirm that all items have been delivered by the vendor in accordance with the order specifications.

The main objective of the record is to officially specify the exact quantity and condition of shipped products. Receiving specialists compare the delivery with the initial purchase orders (PO) to ensure the shipped items meet business needs. Specialists may describe any inconsistencies or defects.

It is critical to understand key distinctions between a goods received note and other business documents.

A Delivery Note is an external document prepared by the seller to accompany the shipment of goods. The receiving party may utilize this note to track delivery, but the GRN is the legal confirmation that commodities are received.

A PO is an internal document created by the purchasing specialists. They send it to the seller before shipping commodities. It serves as the primary record specifying which goods the client requires. PO can be utilized to track the conformity of shipped items.

Purpose of a GRN

In financial terms, the goods received note is a control element for firms. The document ensures that you pay for the commodities you actually obtained. With the GRN, inventory values are precisely noted in reports, and any discrepancies are immediately resolved. Such accuracy is essential for maintaining the company’s stability.

The customer-vendor relationship is another critical aspect of utilizing the document. Companies that maintain records of delivered commodities can track counterparty activity and define quality issues. This enhances purchasing tactics and helps negotiate more favorable terms.

As part of inventory management, enterprise resource planning (ERP) systems record the delivery of inventory items, confirmed by GRN, in the general ledger and in mandatory statements.

Key Details Included in a Goods Received Note

Let’s review the common fields found in most GRNs and their importance for all participants.

• Vendor data: name, location, phone number.
• PO number: It links the goods received note to the initial order.
• Receiving date: This date is crucial for inventory tracking and financial processes.
• Product details: The description includes product titles, model numbers, and other parameters.
• Quantities: This parameter records the exact amount of commodities delivered.
• Condition of commodities: The section lists any defects or missing elements.
• Receiver’s signature: The employee receiving the commodities and the warehouse specialist must sign the document to confirm its accuracy.

These fields ensure alignment between ordered, delivered, and invoiced goods. Financially, they prevent overpayments, scams, and unauthorized operations. Operationally, they ensure inventory accuracy. Specialists may quickly resolve issues and maintain efficient workflows.

How a GRN Works in the Procurement Process

Typically, the procurement process includes the following stages:

1. Identifying needs.
2. Submitting a purchase request.
3. Finding a vendor.
4. Determining the optimal price.
5. Forming a PO.
6. Receiving a bill.
7. Shipment of commodities and services.
8. Conducting a three-way match.

The goods received note is helpful at stages 6 and 7. The seller submits it along with the bill and confirms receipt when shipping the commodities. It is crucial to carefully compare the GRN with the PO and bill number to avoid payment mistakes.

Finance professionals or applications may utilize the GRN to provide invoice matching when working with a goods received note, which requires an approved GRN. Sometimes a procurement type does not require a GRN if no invoice line items are needed. In this case, specialists can utilize a 2-way algorithm only with the PO.

Benefits of Using a Goods Received Note

The purpose of this document goes beyond verifying delivery. It enables a firm to keep records of commercial procedures to make rational decisions. Let’s analyze the most considerable benefits of a GRN.

• Supply chain transparency. It provides a documented record of the commodities obtained, including vendor information, item descriptions, volumes, and conditions. GRN ensures all stakeholders have a common understanding of the shipped products. Aligning the goods received note with POs and the vendor’s invoice creates a transparent path from order to receipt.
• Simplified dispute resolution with vendors. The document identifies any inaccuracies, including amounts, non-conforming products, or damaged commodities. This minimizes misunderstandings and facilitates rapid resolution. A GRN serves as evidence for negotiations regarding returns, replacements, or compensation.
• Helps auditors verify accuracy. A GRN serves as a verifiable document during the audit. It confirms that commodities were received as ordered, in the proper volume and condition. It facilitates compliance with internal controls and regulations. Auditors may utilize GRN to double-check inventory records, supplier invoices, and payments. Such tracking decreases the risk of a potential scam in the procurement process.
• Enhances financial discipline and record-keeping. A GRN confirms that you pay only for delivered and approved products. It prevents overpayments, double transactions, or payments for undelivered commodities. Finance specialists may accurately maintain inventory and bookkeeping records. This document ensures that inventory levels and accounting entries reflect actual receipts.

Many companies today are implementing automation in their procurement systems. Advanced software offers automatic generation of such documents and minimizes mistakes.

Challenges and Common Issues

Difficulties arise occasionally during the procurement process. Let’s analyze the main issues you may encounter when working with a goods received note.

• Manual mistakes. Such inaccuracies typically involve incorrect amounts, erroneous product descriptions, or missing information. They arise due to oversight or inadequate staff training. This leads to inaccurate inventory records, which disrupt operations (e.g., shortages or overstocking) and overpayments.
• Delays in creating GRNs. Slow GRN processing is associated with manual activity and large delivery volumes. Such gaps can delay inventory replenishment and invoice reconciliation. This results in production delays and deteriorating vendor relationships.
• Miscommunication between the warehouse, procurement, and finance departments. Insufficient coordination between teams leads to unaccounted deliveries or the acceptance of defective commodities. It also poses the risk of payment mistakes or unprocessed invoices, which complicates financial reconciliation.

A smart approach is to anticipate potential problems and have a backup plan in case something goes wrong. It will help you define and resolve issues promptly.

GRN in Accounting and Inventory Management

A GRN is the link between the physical obtaining of commodities and financial procedures. Let’s consider its importance in the financial operations.

• Role in accounts payable (AP) and working with bills. The GRN verifies the obtaining of commodities as per the PO. It enables 3-way match accounting between the AP, vendor bill, and PO. Having a GRN prevents financial disputes and price gouging.
• Connection to the firm’s inventory solutions. The document provides verified data to update an inventory management application. It ensures inventory parameters correspond to the actual commodities obtained. Specialists may monitor deliveries, execute reorders, and predict demand.
• Ensuring transactions only for shipped products. The GRN shows the exact volume and condition of delivered commodities. Finance staff can reconcile data with the vendor’s bill to ensure transactions are only for accepted commodities and define discrepancies. Such an approach ensures efficient resource allocation.

To enhance GRN management, firms should adopt standardized templates and procedures. Another crucial step is the training of personnel involved in dealing with GRN, as this equips them with the skills to enhance the process properly.

To sum up, a goods received note is more than a supportive addition; it’s a strategic financial tool. BooksTime specialists help firms adopt innovative technologies and enhance procedures to turn product receipt into a competitive advantage. In complex supply chains, such advanced systems help maintain leadership.

As supply chains grow more global, the importance of effective GRN management continues to rise. Firms that invest in advanced goods receiving software may reduce expenditures, maintain quality, and enhance operational efficiency.