GRN (Goods Receipt Note)
A document confirming that materials ordered have been received and inspected.
A Goods Receipt Note (GRN) is one of the most critical documents in manufacturing operations. It serves as official proof that materials or goods ordered from a supplier have been physically received at your factory, counted, and inspected. Once a GRN is created, the materials officially enter your inventory system and become available for production.
Why GRN is Critical
Without a GRN:
- Your inventory records won't reflect actual stock
- Production planning can't access the newly arrived materials
- Accounts department doesn't know what to pay the supplier
- You have no documented proof of what was received vs. what was ordered
The GRN Process – Step by Step
Step 1: Material Arrival at Factory Gate
Supplier's truck/vehicle arrives with materials. Security or gate-in-charge records vehicle entry and issues a Gate Entry Pass. This is the first checkpoint.
Step 2: Match with Purchase Order (PO)
Store department receives delivery challan from the driver. They pull up the corresponding Purchase Order (PO) in the system and verify:
- Is this supplier authorized to deliver today?
- Does the PO number match?
- Are the material descriptions correct?
- Do the quantities match what was ordered?
Step 3: Physical Counting
Materials are unloaded and counted. Storekeeper verifies:
- Quantity Check: PO says 500 bolts; did we actually receive 500?
- Packaging Condition: Are cartons damaged? Any spillage?
- Labeling: Is each box/bundle properly labeled with item code, batch number?
Step 4: Quality Inspection
For critical materials, the QC team inspects:
- Take a sample (e.g., 5% of total quantity)
- Check dimensions, specifications, material grade
- Perform basic tests (hardness, thickness, color match)
- If inspection fails, material is marked "Rejected" and returned to supplier
Step 5: GRN Generation
Once counting and inspection are complete, storekeeper creates GRN in the system:
- GRN Number: Auto-generated unique identifier (e.g., GRN/2024/00123)
- Date & Time: When material was received
- Supplier Details: Name, GSTIN, delivery challan number
- PO Reference: Which PO is being fulfilled
- Material Details: SKU codes, descriptions, quantities received
- Inspection Status: Accepted, Rejected, or Under Inspection
- Storage Location: Where materials are placed (Bin/Rack number)
Step 6: Stock Update
Upon GRN creation:
- Inventory system adds received quantity to available stock
- PO status updates (partially received or fully closed)
- Accounts department receives notification to process supplier payment
Real Factory Examples
Example 1: Automotive Component Manufacturer
- PO Placed: 1000 kg aluminum sheets from Hindalco
- Material Arrives: Truck arrives with 20 bundles
- Counting: Each bundle weighed on industrial scale → Total = 980 kg
- Issue Found: Short supply of 20 kg (2% shortage)
- GRN Created For: 980 kg (actual received quantity)
- Action: Stores inform Purchase department about short supply; they contact supplier for remaining 20 kg or deduct from invoice
Example 2: Textile Mill with Quality Rejection
- PO Placed: 5000 meters polyester fabric in "Navy Blue" color
- Material Arrives: 100 rolls
- QC Inspection: Checked 10 sample rolls → Found color mismatch (Royal Blue instead of Navy Blue)
- Decision: Full batch rejected
- GRN Created: Yes, but marked as "Rejected GRN"
- Inventory Impact: Stock NOT added; material sits in "Rejected Material" area
- Next Steps: Supplier arranges pickup of rejected material and sends correct color
Example 3: Electronics Manufacturer – Partial GRN
- PO Placed: 10,000 pcs capacitors + 5,000 pcs resistors
- First Delivery: Only 10,000 capacitors arrive (resistors to come later)
- GRN-1 Created: For 10,000 capacitors (partial fulfillment)
- PO Status: Remains "Open" until resistors arrive
- Second Delivery: 5,000 resistors arrive after 3 days
- GRN-2 Created: For 5,000 resistors (completes the PO)
- PO Status: Now marked "Closed"
Types of GRN
1. Standard GRN (Against PO)
Most common type. Material received is linked to an existing Purchase Order. System auto-fills item details from PO; storekeeper only enters received quantity.
2. Without PO GRN (Emergency Purchase)
Sometimes, urgent materials are bought without formal PO (local market purchase, emergency repair parts). In such cases, GRN is created manually without PO reference. Requires supervisor approval.
3. Return GRN (Supplier Return)
If materials were earlier accepted but later found defective, a Return GRN is created to send them back. This reduces your stock and triggers a replacement request or credit note.
4. Job Work Return GRN
When materials sent to a job worker are received back after processing (like heat-treated parts coming back), a special GRN records the inward movement.
GRN and GST Compliance
GRN plays a key role in Input Tax Credit (ITC) claims:
- GRN Date = Eligibility Date: ITC can only be claimed after goods are received (GRN date), not on PO date or invoice date
- Invoice Matching: Supplier's tax invoice details must match GRN (GSTIN, quantities, HSN codes)
- 180-Day Rule: If you don't pay the supplier within 180 days of GRN, ITC must be reversed
Common GRN Mistakes in Indian MSMEs
- No Physical Counting: Stores blindly accept whatever driver claims is in the truck. Later, shortages discovered during production.
- Creating GRN Before Material Arrives: To show "stock available" for urgent orders, some factories create GRN before actual receipt. This is fraudulent and leads to accounting mismatches.
- Not Updating PO Closure: GRNs created but PO remains "open" forever, cluttering the system with incomplete orders.
- Missing Batch/Serial Numbers: For traceable items (pharmaceuticals, food, automotive), batch numbers must be recorded in GRN. Many skip this.
- Wrong Storage Location: GRN created but no one notes where material was kept. Later, stores staff can't locate it physically.
Best Practices for GRN Management
- Same-Day GRN Policy: Create GRN on the day material arrives. Delayed GRNs distort inventory snapshot reports.
- Mandatory QC Sign-off: For critical materials, don't create GRN until QC approves. Prevents defective material from entering production.
- Photograph Packaging: For high-value or fragile items, take photos of packaging condition as proof (useful for insurance/dispute resolution).
- Barcode Scanning: Use barcode scanners to speed up counting and reduce human errors.
- Segregate Rejected Material: Physically separate rejected items in a "Quarantine Zone" to prevent accidental usage.
GRN vs. Other Documents
| Document | Purpose | Created By | Timing |
|---|---|---|---|
| Purchase Order | Request materials from supplier | Purchase Department | Before material dispatch |
| Delivery Challan | Supplier's proof of dispatch | Supplier | At supplier's end before shipping |
| GRN | Buyer's proof of receipt | Your Store Department | Upon material arrival at your factory |
| Tax Invoice | Billing and GST documentation | Supplier | Along with or after delivery |
How ERP Systems Automate GRN
Modern ERPs make GRN processing fast and error-free:
- PO Auto-Link: Scan PO barcode or enter PO number, and all material details auto-populate in GRN form
- Mobile GRN: Storekeeper can create GRN from mobile app at the warehouse, no need to go to office computer
- Real-time Stock Update: Moment GRN is saved, stock quantity updates across all modules (Production, Sales, Accounts)
- Quality Hold Feature: Materials under inspection are marked "QC Hold" – not available for production until QC approves
- Tolerance Checking: System alerts if received quantity deviates from PO quantity by more than acceptable % (e.g., if PO was 1000 pcs and GRN shows 800, alert triggers)
- 3-Way Matching: ERP auto-matches PO, GRN, and Supplier Invoice. If quantities don't match, payment is held
- GRN Aging Reports: Track how many days passed between PO date and GRN date (helps evaluate supplier delivery performance)
GRN and Financial Impact
GRN directly affects your balance sheet:
- Inventory Valuation: The moment GRN is created, your inventory asset value increases
- Accounts Payable: GRN triggers liability creation – you now owe money to the supplier
- Cost Accounting: Material cost from GRN flows into product costing calculations
This is why backdating or inflating GRN quantities is a serious accounting fraud.
See GRN (Goods Receipt Note) in Action
Don't just read about GRN (Goods Receipt Note). See how Karygar automates this process to reduce manual work and errors on your factory floor.