Goods received notes (GRNs) play a crucial role in the accounts payable process, yet they are frequently mislaid, illegible or ignored. RedSky Product Manager Brendan Magill takes a close look at GRNs, their importance and why digitising them is the logical next step for construction companies.
Automated GRNs are the Holy Grail of many Finance teams, especially in construction. On busy sites, these elusive little pieces of paper are all too easily lost, which then slows down the payment process.
Why do GRNs matter?
A GRN confirms the receipt of goods from a supplier. As proof of delivery, it is a vital business document for supplier and customer alike.
Many businesses struggle to keep track of their GRNs, especially if their site managers have a tendency to store up a pile of GRNs before posting or hand-delivering them to head office. Some won’t pay the supplier until they have sight of the GRN and will automatically place any such invoices on hold, pending receipt of the GRN, which may delay payment.
Most risk-averse businesses that have good governance controls in place around segregation of duties use a matching process that’s either two-way (checking the supplier invoice against the purchase order) or three-way (checking the supplier invoice against the purchase order and the GRN).
The three-way match is preferable because it will flag up any differences between the order and what was actually delivered to site. Without this check, companies run the risk of paying for goods that were not received, incorrect or not up to scratch.
Some companies do not collect or process GRNs at all, perhaps because the matching process seems like more effort than it’s worth.
What should be included in a GRN?
It should include the following details as a bare minimum:
- Supplier company name
- Delivery address
- Supplier reference
- Delivery date
- Order date
- Order reference (usually the purchase order number)
- Product details (name, type, size)
- Product quantities
- Name and signature of authorised recipient
- Comments (space for notes about the condition of the product when delivered
Here’s an example:
Before signing the GRN, the authorised person receiving the goods that have been delivered (or are being collected) very carefully:
- Do the goods match those specified?
- Are the quantities accurate?
- Is the quality good, with no sign of damage or defects?
If the answer to any of the above questions is ‘no’, it’s important that the person receiving the goods adds a comment to the GRN, highlighting the shortcoming, before signing. Failure to do this before accepting the goods could render any dispute extremely difficult to resolve, further down the line.
Paper GRNs are problematic
Ask any accounts team in the construction industry and they’ll tell you that paper GRNs are an ongoing challenge.
Here are some of the most common problems encountered:
- Quality – GRNs are often grubby and crumpled. That’s hardly surprising, given that most are completed on a busy construction site and then shoved in the signatory’s back pocket
- Legibility – many GRNs are illegible, having been completed in haste and possibly in the rain by a foreman who had nothing to lean on. Many also find their way into the washing machine before being rediscovered in that back pocket …
- Loss – there’s always so much going on at construction sites that it’s all too easy for a paper GRN to be mislaid. Tracking down lost paper GRNs is often a fruitless task and always a huge waste of time and effort. It also delays payment to the supplier
- Storage – paper GRNs need to be stored carefully so that they can be retrieved easily. Some businesses store all the GRN paperwork at head office, while others choose to keep them at the project location in a dedicated folder or cabinet. And at the end of the project, all that paperwork will need to be shipped off to be archived… and then managed by someone else
An alternative is to scan or photograph the paper GRN and send it to a dedicated email inbox – but without an integrated software system, a member of staff will still have to manage, print or store it.
It’s clear that paper GRNs are not best suited to the demands of today’s construction industry – and they are certainly not ideal during the current pandemic, when companies are doing all they can to reduce the number of ‘touchpoints’ in their processes.
Digital is the way forward
I firmly believe that when it comes to GRNs, the future is digital. With today’s construction companies operating within ever tighter margins, it’s vital for Finance teams to exert control over all projects. And gaining visibility of GRNs at the earliest possible opportunity is very much part of that, of course.
Finance teams simply can’t afford to hang around for days, waiting for GRN documents to arrive in the post, or for lost GRNs to be investigated. They need real-time information about what’s been delivered, where and when.
The best way to achieve this is to digitise the process. There are two main options available:
- Take a photograph of the GRN document and email it to a dedicated email address.
Effectively, this email address acts as a holding pen for all the company’s GRNs. During the Covid pandemic, many suppliers are emailing GRNs to customers rather than requiring their delivery drivers to obtain signed copies of physical paperwork… again, suppliers can send these electronic documents direct to the dedicated GRN email address.
If the company is using integrated construction management software, it should then be able to pull the image automatically from the email into the system, making it easily accessible.
- Use a mobile app that’s fully integrated with your company’s construction project management software.
This approach enables your site teams to capture information about GRNs quickly and easily, including images of the goods themselves and any damaged items, and to store it digitally, making it easily accessible.
It also gives anyone with internet access (and the correct permission level) the ability to locate all GRNs for any given project or supplier instantly.
In my experience, both these digital options speed up payment processing times significantly.
They make the three-way matching process so much easier, because the GRN, purchase order and supplier invoice are all located in one place.
The benefits of digitising GRNs extend way beyond the Finance team, of course, especially if digitised GRNs and invoices are part of an integrated construction project management software solution. For example:
- Prompt supplier payments – because there are no delays caused by posted or mislaid GRNs
- HSEQ investigations – the digital records could be used to investigate how plant equipment landed on site without PAT (portable appliance testing) documentation
- Dispute resolution – a Commercial team could use the records to help resolve a dispute relating to roofing materials used on a project that has failed, three years after completion.
Companies that fail to collect and match GRN information run the risk of paying for materials that were not delivered, short delivered, faulty or damaged. Yet many still struggle to manage GRNs efficiently.
Technology has moved on a long way in recent years so there’s now every reason to take a long, hard look at your payment processes and consider introducing slick new ways to capture site information electronically, including GRNs.
Your staff will definitely thank you for it. And having another cutting-edge, labour-saving system in place will of course be a big tick in the box for talented potential recruits too.
At RedSky, our award-winning construction accounting and project management solution includes an integrated GRN Register, complete with a newly launched Mobile GRN App.
We’ve been providing construction-specific software solutions for more than 40 years. We work with industry experts and have a solid understanding of the needs of construction businesses, particularly those relating to digitising outdated practices.
About the author:
Brendan Magill is a Chartered IT Professional and Member of the British Computer Society. He has 30 years of IT experience, from working in the smallest comms rooms with his sleeves rolled up to implementing strategic improvement plans for businesses of all sizes – primarily in the construction sector. His practical IT knowledge and skills are complemented by an MSc in Business Improvement.