August 31, 2022

Significance of Goods Received Note (GRN) for your Business

Naveen Shayan

LedgerMax specialist

What is a Goods Received Note or GRN?

Also known as a delivery note, a GRN (Goods Received Note) is a significant document which is used by the accounts division to authenticate invoices prior to settling the payments. The accounts department relies on the GRN made by the stores division to scrutinize if all the ordered products are delivered by the supplier and then settle the supplier’s payments for the said goods. Once corroborated that the invoice is in accordance with the GRN, the accounts division will move ahead and make payment to the supplier; however, no payment will be done for any product that is mentioned in the invoice but doesn’t show up in the GRN. On the contrary, the supplier substantiates that the products were supplied to the customer once he verifies the details given in the GRN. This document can also be used by the supplier to spot any type of deception regarding goods transportation. This denotes that a GRN is an equally important document for the customer as well as the supplier.

How does a Goods Received Note (GRN) work?

To explain the entire process of how a GRN works, let’s discuss the goods purchasing procedure followed by businesses in Pakistan:

  • First of all, the person who requires a particular product writes a letter to his department’s head mentioning all the essential details regarding the product.
  • When the request is approved by the department’s head, the purchase department receives the letter to get the required product at the best price and quality.
  • The purchase department then selects a supplier and discusses the conditions along with quality and price details etc. The purchase department selects a supplier on the basis of product quality, timely delivery and best price offered.
  • The purchase department then sends the PO (purchase order) to their selected supplier for the confirmation of their order. Simultaneously, they also send a copy of this purchase order to their warehouse so as to inform them that the required products will be available soon.
  • Now, after receiving the PO, the supplier will start working on it to complete the order and deliver it on time to the warehouse or store division of the company. In the meantime, the store division copies each and every thing from the PO and creates a Goods Received Note (GRN) which is comprised of product name, its quantity and further specifications; however, the price of the product is not mentioned in this document.
  • After completing the order, the supplier delivers it to the warehouse or store division. The store division staff then matches the Purchase Order (PO), Goods Received Note (GRN) and the delivered product. If these three completely match with each other then both the parties sign the Goods Received Note.
  • The signed GRN has three copies; one is kept by the warehouse or store division, the second one is given to the accounts department and the third copy is given to the supplier.
  • Afterwards, the GRN is attached with the actual invoice at the time of billing. The accounts division inspects the GRN to make sure that the products have been delivered to the warehouse. After checking with the warehouse, they accept the supplier’s invoice and proceed with the payment terms.

Why is Goods Received Note (GRN) Important for a business?

A complete and precise GRN is indispensable for purchasing goods for your business. Following are the most significant features of a Goods Received Note (GRN):

  1. A GRN serves as an archive for the quantity and quality of the received products.
  2. The finance and purchase divisions issue a GRN when products are delivered by a supplier.
  3. The GRN is used by the warehouse or store division to keep the inventory records updated in accordance with the info present in it.
  4. If the product delivered has quality issues, the GRN is used as an evidence for the quantity and quality check carried out by the supplier prior to the delivery.
  5. A GRN also helps in finding out if any product was unavailable in the past.
  6. This document also works as a problem solver in case of a dispute between the company and the supplier and also prevents avoidable quarrels.
  7. A GRN is also helpful in evading legal traps or hazards for the business.

What should be included in a Goods Received Note (GRN)?

A Good Received Note (GRN) must include the following:

  • Company’s name of both the purchaser and supplier of products
  • Precise specifications and details of the products
  • PO Number
  • Date and time of delivery
  • Quantity of the product
  • Name and sign of the person delivering the product
  • Name and sign of the person receiving the product
  • A GRN also has a header and a comment line at the end of the document.

To sum up, GRN is a very important document that serves numerous purposes. Above all, it is helpful in ensuring that the suppliers as well as the customers are capable of recording and monitoring everything promptly. It not only saves time for the accountant but also for the supplier and store members. It also helps in avoiding any sort of fraudulent activities or legal mishaps and prevents wrong deliveries as well. Thus, a GRN serves as a powerful evidence to validate that the customer and supplier have already checked all the conditions regarding product delivery.

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