Your organization’s procurement is an essential part of your finances. It deals with how you leverage business funds to acquire the supplies you need to operate from and at the best prices possible.
Given that procurement has a direct impact on up to 70% of organizational revenue, it’s obvious how closely tied procurement is to your organization’s financial operations. As a result, you need to:
One of such data points you need to get a grip on is the inflow of goods into your organization using GRN. Goods received note (GRN), is a two-way document that acknowledges the delivery of goods by a supplier and their receipt by the customer. When a customer issues a purchase order, the supplier is obligated to deliver them as per the terms of their contract.
Upon delivery, the customer issues three delivery note copies to the department requesting the supplies, retains a copy for the finance department, and hands one over to the supplier.
Details of the delivery are confirmed by the three parties before authorization.
Goods received note confirms that an order has been delivered and received and it’s satisfactory to all the parties involved.
Why do you need goods received note?
Goods received note acts as a medium that confirms both parties have kept to their part of the contract and stores that record for future reference, should it be required or if disagreements arise. Such situations include:
Validating quality and quantity of supplies
When a supplier makes the delivery of ordered goods, it’s assumed it’s made in good faith, i.e. assuming that all goods delivered are according to specifications demanded and will pass quality checks.
But the customer can’t just take the supplier’s word for it.
The procurement/finance division then passes the delivered goods over to the requesting department to review if it meets their specifications and quality criteria.
If the supplies in question are acceptable, goods received notes are issued to the counterparties confirming that the supplies are up to standards and helping avoid future disagreements over quality or quantity delivered.
Quality control & issue management
Let’s say after the supplies are delivered, the department within the requesting organization realizes some issue they didn’t point out at first. Now, a closer look at the goods received note shows that functionality was tested and worked flawlessly.
At this stage, the supplier is absolved and can either choose to replace the supplies made in good faith or insist that the customers find a way around it since the goods were in great shape when delivered.
Validating invoices during three-way matching
The three-way matching process offers a highly effective tool for reducing and eliminating billing fraud across organizations of all sizes.
Using the three-way matching process, supplier invoices are matched with supply request notes and goods received notes. Put together, these confirm that:
- The customer requested a certain quantity and quality of supplies (supply request notes)
- The supplier delivered the supplies requested satisfactorily (goods received note), and
- The supplier is invoicing for the delivered supplies at the quantity and pricing specified
Using this method, it’s easy to detect irregularities and catch fraudulent invoices.
Managing inventory & updating stock levels
Among others, goods received notes are a statement of the fact that an organization has taken delivery of supplies demanded.
This should then reflect in warehouse figures of the supply delivered. Goods received notes are therefore used for managing inventory and keeping accurate stock of warehouse figures as supplies are made.
What information is required in the goods received note?
Goods received note helps customers and suppliers make and keep a binding agreement, and empowers organizations to keep stock of inventory levels. Here are the features it uses to achieve that.
- Name of supplier’s organization
- Product details such as name, size, type, technical specifications, etc.
- Delivery time and date
- Product quantity
- Name and signature of supplier’s representative
- Name of receiving organization
- Name and signature of receiver
- Purchase order number
This sums up the information required on goods received notes to be able to keep the records it’s intended for.
Issues associated with processing goods received notes
Like all things procurement, there’s always some issue that could crop up.
The smart approach is to anticipate these issues and create systems and processes to solve them, giving both parties a smooth experience in the customer-vendor relationship.
Here are some of the issues you can expect to encounter while handling goods received notes, whether you’re ordering or if you're supplying.
Slow turnaround times
Typically, a GRN should be issued when a supplier makes a delivery. But in many cases, this isn’t the case since the department within the organization that orders the goods has to get hands-on with the delivered supplies and ensure they’re up to standard.
This can cause hitches with issuing suppliers having to wait until the customer has done their due diligence. Worse, if it’s a larger organization since GRNs can take up to a week to be issued.
Timely communication with suppliers regarding inventory
Say during the process of test running the supplied goods that the procuring organization discovers a hitch or two with the goods delivered to them.
Smaller organizations may be able to reach suppliers right away and inform them. Larger organizations, on the other hand, may just put that on an issue log for some staff to process.
This creates unnecessary delay within both the customer and supplier’s operations since the procuring organization is stuck with unusable goods while the vendor has both their inventory and cash tied up with the customer.
Recording errors leading to invoicing delays
There are three copies of the GRN issued to the ordering department, the procurement team, and the supplier respectively.
During the recording process, it’s easy for one team to miss a tiny detail in their own copy and when it’s time to settle the supplier’s invoice, this creates holdups until it’s untangled manually.
Worse, this could overextend in lead to supplier invoices accruing interest for late payment.
Managing the admin workload required to address issues with GRNs
Managing GRNs is tough admin work. Managing issues with GRNs, even more so.
Now, imagine a situation where all that work is plopped down on the procurement department for them to untangle each issue, manually contacting both ordering departments and suppliers to try finding a middle ground.
This complicates the admin workload procurement carries without adding anything to the bottom line.
Disputing faulty inventory
No matter how stringent your vetting processes are, it could happen that one bad piece of inventory makes it in unnoticed.
And when it is, you understandably try to get redress with your suppliers.
This can be an issue since the supplier in question already conducted extensive checks to ensure quality and quantity compliance.
As such, it might be difficult to swallow the cost for these issues discovered down the line.
Manage GRNs smarter with Kissflow Procurement Cloud
Kissflow Procurement Software is designed to empower your organization to manage your procurement processes end-to-end, especially GRNs. Using Kissflow, you can:
- Design custom processes with our drag-and-drop builder
- Manage vendors right in one place
- Integrate with the rest of your accounting stack
- Communicate and collaborate with your team using chat, notifications, and comments
- Assign and manage procurement tasks throughout your workflow
- Share and store documents and assets
Kissflow simplifies the entire procurement process so you can truly support your business operations, cutting down repetitive admin work.
Learn more about how Kissflow can transform your procurement here.