Goods receive notes/delivery note is prepared by business to document details of the goods received from suppliers. It’s used as a supporting document while recording liability and paying to the suppliers. It serves as evidence for the delivery of specific goods quantity.
So, it can be used by both seller and buyer to compare the number of goods ordered and delivered/received.
Its good practice to attach a copy of GRN with the dispatched invoice; this helps ensure the quantity of the goods invoiced is the same as the quantity of the goods delivered to the customers. Further, GRN is extremely helpful for the buyer to record a journal entry to purchase the goods. Similarly, it’s used as supporting evidence while paying for the goods.
Importance of goods receives a note.
- It helps to document essential details of the transaction, leading to tracking and saving of the notable facts about the transaction.
- Helps finance department to ascertain payment is only made or liability is created for the goods received by the business.
- Acts as supporting evidence in case of disagreement between supplier and buyer. For instance, if there is some difference between the quantity of the goods invoiced and the quantity delivered, the quantity in GRN should stand true. It’s because payment should only be made for the goods that the business has received.
- It helps to prevent payment to the ghost suppliers.
- Important document to enhance the quality of internal control.
- It helps to prevent fraud and error.
- It helps determine the date of recording purchase; it leads to avoidance of confusion for the cut-off date. For instance, accounting standard requires recording the transaction when related risk and rewards are transferred to the customers. So, the date of GRN acts as an important date for recording transactions in the accounting system (it’s applicable for both buyers and suppliers).
- Accountants can depend on the GRN and update accounting records without consulting with the warehouse manager for details of the receipts. Hence, it saves time for the accounting function.
Content of Goods Received Note – (GRN)
GRN has a different design from one company to another, but the main formats remain the same. Information that each note includes are,
1. Supplier’s name
2. Product details such as nature, color, size, weight, and quantity
4. Name and signature of the sender
5. Name and signature of receiver
6. Purchase order number
Process for the goods received a note.
Goods received note is prepared when the business make some purchases. Let’s explain the process of purchasing material-A for the business.
- The production manager prepares purchase requisition.
- Approval is obtained from the head of the production department.
- Purchasing department obtains quotations from different suppliers – quotations can be obtained from the supplier located in different geographical locations.
- The terms are agreed upon with the suppliers, and purchase order (PO) is issued.
- Copy of PO is sent to finance department – for arranging finance, approval of finance needs to be obtained if the purchasing amount exceeds a specific threshold. Another copy is sent to the warehouse to inform the arrival of goods.
- On delivery, the warehouse manager reconciles the inventory received with the PO and GRN.
- Three copies of GRN are prepared. One is kept by warehouse, second is sent to accounts department for raising the invoice, and third is sent to the supplier as receiving of the goods.
- Accounting function updates accounting system by using GRN and invoice received from the supplier.
- The payment voucher is prepared on the due date, and GRN is attached as a supporting document.
Impact of posting GRN on the inventory record of business
Following are the impacts of posting GRN on the business record.
- Impacts on the average cost portfolio of inventory. For instance, if the cost of a recent purchase is higher, it will increase the average per-unit cost of inventory. Another impact will be a higher cost of sales and lower profitability.
- Leads to an increase in the overall inventory level in the accounting record along with liability or outflow of cash.
- Once GRN is posted, the date of purchase is locked for determining cut-off and other accounting considerations.
Problems with the goods receive note
There may be some issues that happen due to human errors and carelessness during GRN processing. Staff may lose paperwork against the original purchase. Further, the process of note-making may be slow and frustrated as it has to be signed by the authorized owner or some other signatories.
Likewise, the administration requires some efforts to answer queries chased by supplier’s payments, etc. And there may be an incorrect amount of items, duplicate orders, or inaccurate prices, etc.
Difference between goods received note and goods dispatched note
Following are some of the differences between goods received notes and goods dispatched notes.
|Goods received note||Goods dispatched note|
|It’s prepared by receiving department of the customer. The receiving/warehouse department reconciles the purchase order with the quantity received and documented in the GRN.||The dispatch department of the supplier prepares it. The dispatch department reconciles sales orders with the GRN to assess the quantity dispatched as requested.|
|Used as related support for record and paying business liability||Used for the raise of invoice by the accounting department.|
|These notes are sequential. Hence, any goods received and not recorded can be identified.||These notes are sequential numbers. Hence, any goods dispatched and not invoiced can be identified.|
|Helps customer’s accounting department to ascertain only goods received are recorded.||Helps supplier’s accounting department to ascertain only goods dispatched are recorded and invoiced.|
Goods received note is an essential document in the purchase cycle of the business, and it’s prepared and signed by the warehouse of the business while receiving goods from suppliers.
The warehouse keeps the copy of the GRN to keep control of inventory; the second copy is sent to the accounting department to update the accounting record. Similarly, the third copy is sent back to the supplier as a form of receiving the goods.
This document is essential as it helps to document and track the details of the transaction, acts as a supporting document in case of dispute between suppliers and buyers, helps to enhance internal control, helps to determine the date of recording purchase, and enhances the overall reliability of recording purchase and making payment.
Sometimes, there are some problems with the GRN because human errors and technical dynamics lead to confusion/difference between quantity invoiced and quantity received.
Frequently asked questions
What is the importance of GRN in the process of purchase?
GRN is an essential document to record details of the inventory delivered to the customer. It helps as evidence for resolving the clash between suppliers and customers. So, it can be used to resolve the clash between customers and suppliers.
Usually, how many copies of the GRN are produced?
Typically, three copies of the GRN are produced that are kept as a record by,
- Supplier (to invoice the customer).
- Customer (to record the liability and payment)
- Warehouse (to keep a record of the business receipts)
Enlist three essential documents for the purchase of inventory (customer perspective)?
- Purchase order (helps to track the quantity of the inventory ordered)
- Goods received note (helps to track the quantity of goods received by the business)
- Purchase invoice (helps to record liability)
Enlist the sales system in the sales cycle.
- Receipt of orders from the customers.
- Goods are dispatched to the customers.
- Invoice issued to the customers.
- The transaction is recorded in the accounting system.
- Payment is collected from the customer.
What is an alternate of the goods received note?
An invoice can be used as an alternate to goods received notes. However, that’s not considered to be one of the best practices.