In the procurement process of any organization, effective management of various data is crucial to ensure smooth operations aligned with organizational goals. One significant aspect of this data management relates to the receipt of goods, and the goods received note (GRN) plays a key role in this regard.
This article will explore the concept of goods received note, shedding light on its process, functions, and its importance within the procurement process. By the end of this read, you’ll gain a comprehensive understanding of why the GRN is essential and how it significantly influences the entire procurement process of your organization.
What is a Goods Received Note?
The goods received note or receipt note or GRN is a document that serves as a confirmation when a supplier delivers goods, and the customer acknowledges receiving them.
When you make a purchase order, the supplier is obliged to deliver the goods or services as per the contract terms. Once the delivery is made, the customer provides three copies of a receipt note to the department that requested the supplies. They keep one copy for their finance department and give one to the supplier. All three parties confirm the delivery details before giving their authorization. The GRN essentially serves as proof that the ordered items have been delivered, received, and meet the satisfaction of all parties involved.
The goods received note is commonly sent alongside an invoice. It is crucial to keep and store the GRN so that the procurement team or accounts payable team can refer to it whenever necessary.
What Details are Included in the Goods Received Note?
The goods received note is essential for upholding agreements between suppliers and customers and helps companies manage their inventory effectively. To fulfill its purpose, the GRN should include:
- Supplier Information: Name of the supplier
- Product Details: Name, size, type, specifications, etc., of the received products
- Quantity of Products: The number of units or quantity of each product
- Purchase Order Details: Purchase order number associated with the transaction
- Delivery Information: Delivery date and time of the received goods
- Supplier Representative Details: Name and signature of the representative from the supplier
- Receiver’s Organization Information: Name of your organization as the recipient
- Receiving Personnel Information: Name and signature of the person at your company responsible for receiving the order
Why Do Businesses Need Goods Received Note?
The goods received note is crucial in the procurement process, aiding in the comprehensive tracking of documents, including contracts and invoices. It plays a key role in efficient invoice verification, ensuring accuracy between delivered goods and invoice details to prevent discrepancies. Serving as a bridge between delivery and invoice dates, the GRN confirms information accuracy and addresses potential payment issues. Acting as a security layer, it allows both suppliers and recipients to double-check orders, contributing to precision in procurement. For the AP department, the GRN streamlines payment processes, saving time. Its pivotal role in preventing fraud and errors underscores its significance in providing a secure and smooth procurement experience for all stakeholders. Let’s take a look at the reasons why businesses need GRN in detail.
1. Ensuring Quality and Quantity of Supplies
When a supplier delivers ordered goods, it’s assumed to be in good faith, meeting specifications and passing quality checks. However, the customer cannot solely rely on the supplier’s assurance. The procurement/finance division hands over the delivered goods to the requesting department for a thorough review of specifications and quality. If the supplies meet the criteria, goods received note are issued, confirming the adherence to standards and preventing future disputes over quality or quantity.
2. Safeguarding Liability for Both Parties
The goods received note plays a crucial role in managing shipment liability for high-value items. It establishes a clear process for transferring liability, safeguarding both buyer and seller interests by ensuring adherence to the contract and preventing financial losses due to incorrect deliveries. For instance, after delivery, if the requesting department identifies issues with the goods or services that were not found while issuing the GRN, the supplier is absolved of their obligation. They can either choose to replace the supplies in good faith or request that their customer work around it since the goods were in acceptable condition upon delivery.
3. Validating Invoices through Three-Way Matching
The three-way matching process is a powerful tool against billing fraud. It involves matching vendor invoices with purchase orders and goods received note. This ensures that the customer requested specific supplies, the supplier delivered them accurately, and the invoiced quantity and pricing aligned with the delivered supplies. This method helps detect irregularities and prevents fraudulent invoices.
4. Supply Chain and Inventory Management
The goods received note serves a dual purpose in supply chain and inventory management. By monitoring GRNs at different points in the supply chain, you can assess inventory levels and measure key performance indicators, providing insights into operational efficiency. Issued only after thorough verification, it ensures the accuracy of received goods. This process enhances overall inventory control, allowing organizations to maintain optimal stock levels and streamline operations across various touchpoints in the supply chain.
Challenges in Goods Received Note Processing
Navigating the complexities of procurement involves anticipating and addressing potential issues to ensure a seamless experience in the customer-vendor relationship. Here are some challenges commonly associated with handling GRNs, whether you’re on the ordering or supplying side.
- Communication Challenges with Suppliers
Ensuring timely communication about discovered issues with supplied goods can be challenging, especially in larger organizations, potentially causing delays in addressing problems.
- Delays in Issuing GRNs
Although ideal, issuing goods received note promptly upon delivery may face delays, particularly in larger organizations, where the verification process by the ordering department can extend the issuance timeline.
- Recording Errors Impacting Invoice Processing
The issuance of three copies of the GRN to different departments increases the risk of recording errors, leading to delays in settling supplier invoices and potential interest charges for late payments.
- High Administrative Workload
Efficiently managing GRNs involves significant administrative work. Issues with GRNs can add to the workload of the procurement department without contributing to overall company value, emphasizing the need for an effective Goods Received Not Invoiced (GRNI) reconciliation process.
- Resolving Disputes over Faulty Goods
Despite rigorous vetting processes, the possibility of a defective item going unnoticed exists. Resolving issues with faulty goods becomes challenging once a GRN is submitted, making recourse more difficult after the agreement upon receipt implies satisfaction.
Create and Manage GRNs with Ease
Peakflo is crafted to empower procurement and accounts payable teams with a holistic solution to streamline the entire procure-to-pay process, including goods received note.
With Peakflo’s Vendor Portal, you can:
- Create GRNs from the approved purchase orders with a single click
- Automatically match GRN line item details with the PO details and flag mismatches
- Allow vendors to create invoices against GRNs
- Centralize vendor management and communications
- Seamlessly integrate with your accounting software
- Monitor actions and timelines through a robust audit trail
Peakflo streamlines procurement, allowing your team to optimize its impact on the bottom line and redirect efforts toward value-added tasks.
