Goods Received Note – Definition, Uusages, Importance, And More

Definition:

Good Received Note, also referred to as GRN can be defined as a two-way document that mainly acknowledges delivery of the goods by a certain supplier, in addition to their subsequent receipt by their customer.

When the customer issues a purchase order, the supplier is mostly obligated to deliver them in accordance with the terms and conditions that have been mentioned on the contract.

Under usual protocol, following the purchase order, when the goods are subsequently delivered, Goods Received Note acts as a receipt which indicates that the inventory has been received, against the pay order that was issued.

The receipt of Goods Received Note acts as a satisfactory notice, that the goods have now been delivered, and they need to be accounted for in the books so that the records are set straight.

Importance of Goods Received Note

Procurement tends to be an important part of any organization. Similarly, for the party that is selling these goods, it is important to keep a proper record that can ensure that all transactions are duly accounted for in the business.

In addition to following normal delivery protocols, it is important to work with Goods Received Notes because of a number of reasons. These reasons are as follows:

Validating quality, as well as quantity of supplies

When a delivery pertaining to certain goods is made, it is assumed that all goods are received as they were instructed in the Purchase Order. In the same manner, it is also important from a supplier’s perspective to note that these goods that are sent to the customers are acceptable in terms of quality, as well as other specifications that are mentioned in the contract.

After checking for the suppliers, the receiver of the goods issues Goods Received Note as a guarantee that the goods that have been received are acceptable in terms of quality, and quantity.

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Quality Checks after Order Delivery

Under some instances, quality issues arise after the goods have been delivered. In this case, Goods Received Note acts as a proof, which all quality checks were undertaken at the time of delivery, and therefore, the issue arose after the goods were actually delivered.

When faced with such a situation, the supplier can either choose to replace the goods free of cost (in good faith), or they can simply refuse to do so, since all quality protocols were checked prior to the Goods Received Note being issued. Therefore, this particular document can be a source of conflict resolution, if need be.

Validation of invoices during three-way match

Under the three-way matching process, there is a highly effective tool that is used for reducing and subsequently eliminating the chance of fraud within the billing process of the company.

Using this protocol, the supplier invoices are matched, with supply request notes as well as goods received notes. These together are used to validate the following:

  • Confirmation that the customer actually requested the certain quantity of supplies (Supply Request Note)
    • The supplier had delivered the requested supplies in a satisfactory manner (Goods Received Note)
    • The supplier invoiced delivered supplies at the quantity and pricing that was specified

The methodology mentioned above plays a very important role in detecting irregularities, and catching any fraudulent activities.

Inventory Management and Stock Level Upgradation

Since Goods Received Note is a communication document that conveys that the goods and services have been delivered to the customer, it should also technically be used as a source document that helps to manage inventory levels and subsequent stock levels.

Once the Goods Received Note is issued the supplier, as well as the receiver of the goods can make the required amends to their inventory levels.

Information Included in Goods Received Note

Goods Received Note is a critical document that serves a multitude of purposes, primarily on grounds of ensuring that customers, as well as suppliers are able to record everything in due time. It involves including a number of different aspects, which include the following:

  • Name of the Organization – for both the supplier, as well as the receiver of goods
  • Product Details and Specifications
  • Delivery Time and Date
  • Product Quantity
  • Name and signature of supplier’s representative
  • Name and signature of the receiving person
  • Purchase Order Number
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The specifications mentioned above may or may not include any other terms and conditions that the creditors deem necessary

Issues Pertaining to Goods Received Note

Regardless of the fact that Goods Received Note tends to be an important document for communication-related purposes, yet it can be seen that there are a couple of challenges that companies might come across when dealing with Goods Received Notes. These issues are as follows:

Delayed Order Processing and Invoicing

Goods Received Note is mostly issued when the delivery has been made. However, in some cases, processing times might be unnecessarily delayed. This is because after the delivery, the receiver might ask for a grace period to properly check the delivery for any differences in what they had ordered versus what was actually received.

This delayed processing might eventually result in delayed payments, or processing delays because of lack of paperwork.

Timely Communication with suppliers pertaining to inventory

Since Goods Received Notes acts as an official document, it is important to establish timely communication channels with the suppliers. In this regard, it is important to note the fact that Goods Received Note might act as a hindrance in enabling smoother communication channels because it does not render smooth responses under most circumstances.

This unnecessary delay is mostly caused because of bureaucracy within the departments that eventually results in untimely errors.

Invoicing Delays

Since Goods Received Notes might not be ready in an upfront manner, sit might result in companies facing substantial delay in invoicing. This might adversely impact the cash flows of the company since financial incoming might be compromised.

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Alternate of Goods Received Note

A lot of organizations do not normally prefer going forward with the Goods Received Note. In this aspect, companies might resort to other options in terms of processing the receipt of goods. In a lot of instances, companies present invoice copies to the buyer of the goods, and keep a signed receipt with them in order to retain the proof that the goods have been delivered in time.

In this regard, any document can serve a purpose similar to Goods Received Note, as long as it validates that all the performance obligations (of the particular good or service) have been included in the order delivery.

Example of Goods Received Note

The example of Goods Received Note is illustrated in the following example:

Hetman Co. received a purchase order worth $25,000 from James Enterprises. Upon receiving the purchase order, Hetman Co. discovered that they only had goods worth $20,000 in stock.

Upon confirmation from James Enterprises, Hetman Co. decided to deliver the goods they had on hand to James Enterprises. When James Enterprises received the consignment, they checked the delivery for quality and quantity, after which they signed the Goods Received Note. This was handed back to Hetman Co.

In the example mentioned above, it can be seen that Hetman Co. delivered goods and services worth $20,000. After this receipt, both Hetman Co. and James Enterprises decided to make the amends in their accounting records, to reflect the sale of inventory, and purchase of inventory. Once the Goods Received Note is signed and returned, the invoice is generated and handed over to the purchaser.