Goods Received Note (GRN): A Comprehensive Guide
The goods received note (GRN) is a vital part of documentation for companies deeply engaged in the accounts payable process. In the long run, this simple document can help businesses avoid unwanted burdens. As a business owner, you must know everything about GRN to run your operations smoothly and stay compliant. In this article, we will provide a comprehensive overview of GRN and answer all the questions related to it.
Table of Contents
What is a Goods Received Note (GRN)?
A goods received note certifies that goods have been delivered by the supplier to a customer. GRN lists the items supplied to the buyer. The customer uses this record to compare the delivered and ordered products. The store's department will check the items' physical condition and compare them to the purchase order when the buyer receives them. The department issues the GRN after verifying that every item received is in perfect physical condition. Buyer has the right to reject goods if they don't fulfil the standards of the purchase order. The buyer executes a fresh purchase order for the rejected batch and only issues the GRN for approved goods. The store's department is in charge of issuing GRNs. The supplier, procurement, accounts, and store departments have multiple copies prepared for their records.
Components of a Goods Received Note (GRN)
A Goods Received Note (GRN) is used as a receipt when the goods are delivered to check everything is as ordered. Here is an outline of its main elements:
Header:Â This section provides details such as the date of receipt, a unique GRN number, and the company's name.
Details about the supplier: Identify the supplier with their contact information, name, and address.
Delivery Details:Â Records details about the actual delivery, including the time and date, the mode of transportation (truck, air freight, etc.), and any special instructions or delivery notes.
List of Items: This section, which is the core of the GRN, offers a thorough inventory of every item received. It consists of:
Product Description:Â An explanation of each item in detail.
Quantity:Â The precise number of units of each item that were received.
Unit Price:Â The purchase order's agreed-upon price per unit.
Total Value:Â Each item's computed total cost (quantity times unit price).
Item Codes:Â Any pertinent reference numbers or product codes utilised for internal tracking.
Section on Quality Check (Optional):Â Some GRNs include a section for noting any quality or damage issues upon arrival, though this isn't always the case.
Signatures:Â To confirm receipt and validate the delivered goods, authorised staff members from the supplier (or their delivery representative) and the receiving company sign the GRN.
Features of GRN
Receiving and paying for goods depends on having a complete and accurate GRN. The Accounts Payable team will compare the GRN with the invoice. These are GRN's key characteristics:
It serves as a record of the quantity and quality of the received goods. Â
When a supplier delivers a shipment of goods, the finance and purchasing departments create an internal document called a goods received note. Â
Using the data from the Goods Received Note, the Stock/Warehouse department updates inventory records using this document.Â
The goods will be ready for production or sale sooner if they enter the warehouse more quickly.
The Note will serve as documentation of the supplier's pre-delivery quality and quantity check if any issues with quality.
GRN is helpful to ascertain whether any items were out of stock or back-ordered.
Aside from preventing needless arguments, the Goods Received Note will act as a source of conflict resolution in the event of quality disagreements.
Securing a Goods Received Note is a great way to avoid trouble with the law because of its significance.
Uses of Goods Received Note (GRN)
A GRN serves as a way for both parties to confirm the delivery of goods. GRN can be used in a variety of circumstances:
Document for the future:Â A record of the items received can serve as a guide for upcoming situations, like audit trails or dispute resolution.
Analysing the received goods:Â GRN assists in confirming the buyer's receipt of both quantity and quality of goods. It ensures the supplier that the products are up to standard.Â
Inventory management:Â GRN helps maintain accurate inventory levels by monitoring it.
Help with accounting:Â GRN enables accountants to update the stock ledger to purchase entries and verify inventory balances. This aids in accounts payable management as well. Items not received in accordance with GRN may be deducted, and the suppliers may cover the remaining amount.
Steps to Issue Goods Received Note
During the delivery phase of the procurement process, a GRN aids in increasing efficiency. The subsequent process flow is as follows:
Step 1: Obtain purchase orders and invoices for the merchandise.
Step 2: Monitor the goods' unloading at the location.
Step 3:Â Verify the received goods physically to confirm the quantity and quality match the purchase order. Test a few materials for quality.
Step 4: Notify the supplier of any quantity shortages or disputed items.
Step 5:Â After verification, GRN is distributed by the store's department in lieu of authorised products. The manager of the department and the verifier must sign the notes. A copy is delivered to the supplier to confirm receipt of the goods. The appropriate departments receive the remaining copies.
Step 6: When the accounts department receives the GRN, they will update the store's ledger account.
The goods received note is substantial proof that the goods were received. It guarantees that the proper amount of goods is always available and assists in keeping track of incoming inventory records. GRN lessens the possibility of disputes resulting from defective goods. It reconciles supplier invoices with the received goods in order to make accurate payments. Additionally, it is documentary proof that accountants can use to keep account balances accurate.
GRN in the Procurement Process
Ordered goods linked to incoming goods verification through the Goods Received Note. The GRN connects to the procurement process as a whole in the following ways:
Matching Purchase Orders
The supplier issues a purchase order (PO) and then delivers the goods. Following receipt, the GRN is released and compared to the PO to verify the items and quantities received.
Getting and Examining
After delivery, the items are examined to ensure they are accurate—that is, they match the quantity and quality that were ordered. The GRN assists the receiving department in determining whether the products' components and other details match those in the purchase order (PO). This lowers the possibility of receiving defective or inaccurate goods even more.
Verification of Invoices
The GRN is transferred to the finance department to verify that the quantity and price of the goods, as specified in the purchase order and the supplier's invoice, correspond. Overcharging and the payment for goods that are not delivered are somewhat avoided.
Acceptance of Payment
The finance team releases the supplier's invoice for payment once the GRN has checked all the boxes, and checks and balances guard against any financial errors.
Updates on inventories
Stock levels are updated in the warehouse or an inventory management system to reflect the new stock number. Thus, shortages or overstocks are avoided and stock is better monitored.
Keeping Records and Conducting Audits
Since the GRN is preserved in the business's procurement files, it is a proof of delivery and receipt. It is an essential document for internal audits and rule and regulation compliance.
Automating Goods Received Note Processes
Due primarily to manual handling and paperwork, creating a goods received note has many potential problems. These disadvantages include the time required for data entry, the possibility of human error, and process delays. To make the GRN process simpler, an increasing number of businesses are automating their processes. Here are some ways that automation can help GRN management:
Increased Processing Speed
Automated GRN generation enables businesses to document the receipt of goods. It helps to enter data automatically, removing the delays that manual entry usually causes.
Preventing Human Error
Human error can occur when entering data manually, documents are lost or not entered into the system in a timely manner, or when the inventory is not updated correctly. The GRN is automated to minimise and avoid these mistakes.
Smooth Interaction with Other Frameworks
Automated GRN systems are integrated with current inventory management, finance, and procurement software to help supply chains maintain data consistency across purchase orders, invoices, and goods received notes.
Updates on Inventory in Real Time
Once goods are received, automated GRNs enable real-time stock level updates, ensuring that inventory is always accurate. As a result, overstocking and stock shortages will cease.
Minimisation of Documentation
Paper-based GRNs are prone to loss or damage. Digital records can be stored and retrieved instantly, eliminating paper minimises loss.
Enhanced Audits and Compliance
All transactions are digitally recorded by automated systems, facilitating auditing because all approvals for purchase orders and market listings are in one location. Audit trails in automated GRN systems indicate who authorised the goods' receipt and when.
Three-Way Matching That Works
Automation enables faster three-way matching, expedites the invoice approval process, and guarantees that suppliers won't have their payments withheld due to unprocessed invoices or discrepancies found.
Methods for GRN Number Search
There will be a GRN record for each GRN number. You will give a GRN number during a delivery. The GRN number is entered into the procurement files for future use. You can use this GRN number to track inventory, settle disputes, and retrieve GRN records for auditing purposes. To find and utilise a GRN number for your procurement procedures, follow these steps:
Utilising the GRN Number to Retrieve Records
The procurement or inventory management systems assign a number to each GRN. To learn more about a specific delivery, including what goods arrived, how much of each, and any discrepancies noticed, a company will frequently search the database for a precise GRN.
Monitoring Received Goods
The product is tracked through several inventory management stages using a GRN. It guarantees that inventory levels reflect the most recent deliveries and that all received material is added to stock.
GRN No. Automated Systems Search
Businesses that employ automated systems can incorporate their software to speed up GRN number searches. Users can enter the GRN number into a search function on a digital platform, which will automatically pull related records and documents—like purchase orders and invoices—from a database. Users can avoid searching through paper records in this way.
Sustaining Conformance
A GRN is essential in industries where audits and regulatory compliance are significant because it is linked to the delivery of goods. Every time an auditor shows up, they want to see the GRN number to confirm the delivery matches the company's records.
Resolution of Conflicts
Using the GRN number to file a complaint with a supplier can also be helpful. Businesses can check the GRN number to see what was requested and received if they place an order and the items they receive don't match what was specified.
Benefits of Goods Received Notes
Understanding the benefits of a Goods Received Note is just as crucial as recognising its meaning. An internal document that certifies that you have received the goods is called a Goods Received Note (GRN). It will display the correct address of the location from which the goods are expected to be transported, along with the date and time you received the product. Your business will benefit from a strong GRN in many ways. Below is a summary of these advantages. A GRN, however, should not be used in place of a legitimate invoice.
Aids in Preventing Legal Problems: The invoice provides thorough documentation of the advantages of the Goods Received Note. It is a crucial document in the procurement process in order to prevent legal problems. This note contains all the necessary details for a vendor's payment. For this reason, it's critical to keep track of and preserve the document for later use.
Serves as Internal Documentation of Received Goods: Authorised employees are given Goods Received Notes (GRNs) to accept goods or services. A GRN serves as an internal proof of receipt as opposed to a delivery note, which is a tangible action. Statutory reporting to HM Customs and Excise also necessitates GRN procedures. It includes an indicator for inclusion and a commodity code. A GRN has details about the quantity and physical state of the goods. The seller keeps a record of the receipt, and the buyer signs and issues a GRN to verify the delivery of the goods.
Displays the Supplier-Related Information: Items Acquired A note is a formal legal document to an order's receipt. After receiving the goods, the buyer fills it out, and it can be used as evidence in court. It displays the supplier's name along with the date of delivery. The supplier's name and address are also displayed. The Goods Received Note includes the kind of goods bought, their quantity, rate, and cost. A signature from authorised personnel completes the note.
Participates in the Accounting Procedure: GRN enables accountants to reconcile the inventory ledger with purchases and verify inventory balances. It may also aid in the management of accounts payable. Suppliers may pay the remaining amount after deducting any items not paid by GRN.
Shows the Time and Date that the Goods were Issued and Received: The goods receipt documents the physical transfer of goods from an outside vendor into a warehouse. Warehouse managers typically use it to plan and monitor the inventory of goods produced or ordered for sale. The date and time of issue and receipt are displayed on the goods receipt. It is also an essential document for inventory management. Software like SAP automates the goods receipt process.
ConclusionÂ
You now understand the meaning of a goods received note. To assist with accounting and dispute resolution, it is crucial that businesses have a precise picture of the movements of goods, correlate the receipt of goods with the purchase order and invoice, and know the exact receipt of goods. The manual preparation of GRNs was labour-intensive and prone to mistakes. Automation is becoming more prevalent in today's business environment as companies look to streamline their processes, reduce errors, and save time. Maintaining procurement and financial control and making data-driven decisions depend on improved inventory management and financial accuracy, enhanced by automating GRN management.
FAQ
Q1. What is the primary purpose of a Goods Received Note (GRN)?
When a supplier delivers goods to a buyer, a formal document known as a "goods received note" certifies that the quantity and quality of the delivered goods match the purchase order. In addition to helping resolve supplier disputes and ensuring the details are validated before the payments are made, it keeps inventory records.
Q2. Who is responsible for creating the GRN in a business?
Preparing a GRN is usually the duty of the department that receives it, store employees, or the individual the business designates to accept the delivery of goods. When the goods arrive, they are evaluated in comparison and compared to the purchase order (PO) before a GRN is created to document the items received according to the PO's conditions.
Q3. Can a GRN help resolve disputes between buyers and suppliers?
Indeed, GRN is an effective option for resolving conflicts. If the delivered and ordered goods differ, GRN offers proof that the goods were delivered as specified. It can be compared to the supplier's invoice and the purchase order, and problems with missing or damaged items and mistakes can be resolved.
Q4. Is it mandatory to issue a GRN for every delivery?
While most businesses recommend a GRN, especially for high-value stock or frequent deliveries, it is not always legally required. Nevertheless, it maintains precise records and facilitates financial and procurement procedures. Some companies may use simplified documentation for low-value, infrequent deliveries.
Q5. How does automating the GRN process benefit businesses?
Automating the GRN process helps to obtain information more quickly and accurately, reduce paperwork, and enable real-time inventory updates. By integrating GRN with other systems, such as inventory and procurement software, and minimising human error, automation shortens the time needed for financial reconciliation. All that automation does is increase operational efficiency and provide a more transparent audit trail.
Q6. Can GRNs be used for services, or are do they apply only to goods?Â
Physical goods, not services, are the subject of Goods Received Notes. It is uncommon to use a GRN to record services because it is a record of the receipt of tangible goods. These are recorded on service reports or something similar instead. Some companies may develop equivalents to track service delivery in some cases.
Q7. How does a GRN differ from an invoice?
When the quantity and quality of the goods received match the purchase order, the buyer issues a GRN. In contrast, the supplier sends out an invoice to get payment for the delivered goods. GRN is used to process payments for goods and check invoices.
Q8. What should a company do if discrepancies exist between the GRN and the invoice?
To ensure what is being invoiced for is what was received, the company must promptly identify any discrepancies with the GRN (by contacting the supplier, reviewing the purchase order, etc.).The invoice should not be accepted for payment if any issues.
Q9. How long should a business retain GRN records?
GRN records are kept for a specific amount of time due to internal company policies and legal or regulatory requirements. Companies maintain GRN records for at least five years to adhere to tax and audit requirements. It is required to track orders and transactions made, handle potential disputes, settle audit discrepancies, and preserve the integrity of financial and procurement records.
Q10. What is the connection between the GRN and inventory management?
The Goods Received Note (GRN) is crucial to inventory control because it updates the inventory. The inventory system also receives updates on stock quantities. It is essential to track and order the right quantities to ensure that the stock is never under or overordered.
Q11. What is GRN in accounting?
A Goods Received Note (GRN), as used in accounting, is a record attesting that a supplier has delivered goods to a customer and that the customer has accepted them.
Q12. What is GRN in the purchase?
An acknowledgement of the delivery of goods by the supplier and their receipt by the customer is a good received note (GRN). According to the conditions of their contract, the supplier must deliver the goods when a customer issues a purchase order.
Q13. What does GRN not disclose?
Information about service products is not disclosed on a Goods Received Note (GRN). The delivery of tangible goods from a supplier to a buyer is documented by a GRN, which also contains details about the goods' nature, quantity, and cost.
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