Direct GRN Workflow

The Direct GRN Workflow bypasses the purchase order stage and allows you to receive goods directly into inventory. This simplified workflow is perfect for situations where creating a formal PO would slow down operations without adding value.

When to Use Direct GRN Workflow

This workflow is ideal for:

• Walk-in purchases from local suppliers
• Emergency purchases requiring immediate delivery
• Small-value items below PO threshold
• Retail store restocking from known suppliers
• Regular deliveries with standing arrangements
• Local hardware purchases for immediate needs
• Emergency repairs requiring immediate parts

When NOT to Use This Workflow

Avoid Direct GRN for:

• High-value purchases requiring approval
• First-time suppliers needing vetting
• Items requiring competitive quotes
• Budget-controlled purchases
• Import purchases requiring advance documentation
• Capital equipment needing formal approval

For these situations, use the Standard Procurement Workflow.

Process Flow

Step 1: Purchase Goods → Step 2: Receive at Warehouse → Step 3: Create GRN → Step 4: Process Invoice → Step 5: Make Payment
    ↓                         ↓                           ↓                  ↓                       ↓
Staff Buys Goods      Physical Delivery           Create Receipt       Match Invoice        Pay Supplier
From Supplier         To Warehouse                In System            To GRN               Per Terms

Key Difference from Standard Flow: No PO creation or approval before purchase.

Step 1: Purchase Goods from Supplier

Responsible Role: Authorized Staff (Purchasing, Warehouse, Maintenance)

Authorization Requirements

Before making direct purchases:

Establish Clear Policies

• Maximum value: Per-transaction limit (e.g., $500)
• Approved suppliers: List of trusted local suppliers
• Authorized staff: Who can make direct purchases
• Purchase categories: What can be bought directly (consumables, small tools, emergency parts)
• Documentation required: Receipts, quotes, justification

Purchasing Process

When making the purchase:

1. Verify Need

• Item genuinely needed immediately
• Budget available for purchase
• Supplier is approved or reputable
• Price is reasonable

2. Get Verbal Approval

• Contact supervisor or manager
• Explain need and urgency
• Confirm purchase amount
• Get verbal authorization

3. Make Purchase

• Buy from supplier
• Get official receipt/invoice:
  • Supplier name and details
  • Tax invoice number (if applicable)
  • Date of purchase
  • Item description and quantity
  • Unit price and total
  • Tax amount
• Keep all documentation

4. Document Justification

Make notes for later entry:

• Why was direct purchase necessary?
• Why couldn’t standard PO process be used?
• Who approved the purchase?
• Business impact if not purchased immediately

Getting Goods to Warehouse

If purchased nearby:

• Transport goods directly to warehouse
• Hand over to warehouse staff with receipt
• Explain purchase reason

If delivered by supplier:

• Coordinate delivery time
• Ensure warehouse staff expect delivery
• Provide copy of receipt/invoice in advance

Step 2: Receive Goods at Warehouse

Responsible Role: Warehouse Staff

Pre-Receipt Checks

When goods arrive without prior PO:

Verify Legitimacy

• Staff member present to explain purchase
• Receipt/invoice provided
• Purchase appears authorized
• Items look appropriate for business

Physical Receipt

1. Count and Inspect

• Verify quantity matches receipt
• Check for damage
• Verify items are as described
• Test if applicable (equipment, tools)

2. Quality Check

• Items are correct type/specification
• Items are in good condition
• Packaging intact
• Expiry dates acceptable (if applicable)

3. Documentation

• Collect original receipt/invoice
• Get delivery note if separate delivery
• Take photos if needed
• Note any discrepancies

Temporary Holding

If immediate GRN entry isn’t possible:

1. Move to receiving area
2. Tag items with:
   • Date received
   • Received by (name)
   • Quantity
   • Temporary holding tag
3. Store securely
4. Create GRN within same day

Step 3: Create GRN in System

Responsible Role: Warehouse Staff or Purchasing Admin

Navigation

[Purchasing > Goods Receipt > New GRN without PO]

or

[Inventory > Goods Receipt > Direct Receipt]

GRN Header Information

Document Details

• GRN Number: Auto-generated
• GRN Date: Today’s date (or actual receipt date)
• GRN Type: Select “Direct GRN” or “Without PO”
• Receipt Mode: Walk-in purchase, Emergency, Other

Supplier Information

• Supplier: Select from supplier master
  • If supplier not in system: Create supplier first or use “Cash Supplier” account
• Supplier Invoice Number: From receipt/invoice
• Supplier Invoice Date: Date on receipt
• Reference: Your internal reference (optional)

Purchase Justification

• Reason Code: Emergency, Urgent, Small Value, Standing Order
• Remarks: Brief explanation
  • Example: “Emergency repair parts for production line breakdown”
• Approved By: Name of person who authorized

GRN Line Items

For each item purchased:

Item Selection

If item exists in inventory master:

1. Click Add Item
2. Search and select item code
3. Description auto-fills
4. Proceed to quantity entry

If item doesn’t exist (new item):

1. Click Add Non-Stock Item or Add New Item
2. Enter item description
3. Select item category/group
4. Specify if should be added to inventory master
5. Proceed to quantity entry

Quantity and Pricing

Required entries:

• Quantity: Actual quantity received
• Unit of Measure: EA, PC, KG, BOX, etc.
• Unit Price: Price per unit (from receipt)
• Currency: If different from base currency
• Tax Code: VAT/GST code
• Tax Amount: From receipt or auto-calculated

Price fields:

• Invoice Price: Price on supplier receipt
• Actual Cost: Invoice price minus any immediate discounts
  • Usually same for direct purchases
  • Adjust if discount applied at purchase point

Account Coding

Assign expense/asset account:

• G/L Account: Expense account

  • Office Supplies
  • Repair & Maintenance
  • Small Tools
  • Emergency Purchases
  • Other Operating Expenses

• Cost Center: Department or project

  • Production Department
  • Maintenance
  • Administration
  • Emergency Repairs

• Project Code: If purchase for specific project

Serial Number Entry

For serialized items:

When Required

• Electronics (computers, phones, tablets)
• Power tools and equipment
• Instruments and measuring devices
• Items with warranties
• Asset-tagged items

Entry Process

1. Click line item
2. Click Serial Numbers button
3. Scan or type each serial number
4. System validates:
   • No duplicates
   • Correct format
   • Count matches quantity
5. Save serial entries

Storage Location

Allocate to warehouse locations:

Location Assignment

1. Click line item
2. Click Storage Location
3. Assign location:
   • Warehouse: If multiple warehouses
   • Zone: Area in warehouse
   • Bin/Rack: Specific location
   • Quantity: Items in location

Direct to Use

If items for immediate use (not storage):

• Location: “Direct Use” or “Consumption”
• Quantity: Full quantity
• Note: “For immediate use in [purpose]”

Document Attachment

Attach all supporting documents:

Required Documents

1. Supplier Receipt/Invoice

   • Original tax invoice or receipt
   • Must be clear and readable
   • Scan or photograph

2. Approval Evidence (if not in system):

   • Email authorization
   • Approval form
   • Manager’s written approval

3. Additional Documents:

   • Delivery note (if separate)
   • Photos of items (for high-value)
   • Warranty cards
   • Product manuals

Upload Process

1. Click Attachments tab
2. For each document:
   • Click Add Document
   • Select document type
   • Choose file
   • Add description: “Supplier invoice” or “Purchase approval”
   • Upload
3. Verify all attached before confirming

Step 4: GRN Confirmation and Posting

Pre-Confirmation Review

Before confirming, verify:

Data Accuracy

• All items entered correctly
• Quantities match physical count
• Prices match receipt
• Tax calculated correctly
• G/L accounts assigned
• Serial numbers entered (if applicable)
• Storage locations assigned

Documentation Complete

• Supplier invoice/receipt attached
• Approval documented
• Justification noted
• Additional docs attached

Authorization Check

• Purchase within policy limits
• Supplier is approved/acceptable
• Explanation provided for direct purchase
• Required approvals obtained

Confirm and Post GRN

1. Click Review Summary
2. Verify totals:
   • Total quantity
   • Total value
   • Tax amount
   • Grand total
3. Click Confirm GRN
4. System processes:
   • Creates GRN document
   • Updates inventory quantities
   • Creates accounting entries
   • Generates notifications
5. Print GRN for filing

Accounting Entries Created

For inventory items:

Debit: Inventory (at actual cost)        $500
Debit: Input Tax                          $90
Credit: GRN Accrual / Payables                   $590

For expense items (non-stock):

Debit: Expense Account                   $500
Debit: Input Tax                          $90
Credit: GRN Accrual / Payables                   $590

Post-Confirmation Tasks

1. File documents:

   • Print GRN copy
   • Attach physical receipt
   • File in pending invoice folder

2. Update whiteboard/tracker:

   • Note GRN number
   • Mark as awaiting invoice
   • Set follow-up date

3. Notify accounts:

   • Inform AP that GRN is created
   • Provide GRN number
   • Mention expected invoice

4. Issue items if needed:

   • If for immediate use, create issue document
   • Link to GRN for traceability

Step 5: Process Purchase Invoice

Responsible Role: Accounts Payable

Invoice Matching Options

Option A: Invoice Same as Receipt

If supplier’s receipt serves as tax invoice:

1. Navigate to GRN
2. Click Convert to Invoice
3. System creates invoice:
   • Copies all GRN details
   • Invoice number = Receipt number
   • Invoice date = Receipt date
   • Amount = GRN amount
4. Review and confirm
5. Post invoice

This is most common for direct purchases where receipt IS the invoice.

Option B: Formal Invoice Received Later

If supplier sends separate formal invoice:

Navigation: [Purchasing > Purchase Invoices > New Invoice]

1. Invoice Header:

   • Invoice number (from supplier)
   • Invoice date
   • Supplier
   • Reference GRN: Link to GRN

2. Two-Way Matching:

   • System compares GRN vs Invoice
   • GRN: What you received and recorded
   • Invoice: What supplier is charging

3. Check for Variances:

   • Quantity: Should match (already received)
   • Price: Should match receipt
   • Amount: Should match GRN total

4. Handle Variances:

   • No variance: Auto-match and approve
   • Minor variance: Document and approve
   • Major variance: Contact supplier

Invoice Approval

Approval Rules for Direct GRN Invoices

Posting Invoice

Once approved:

1. Post invoice to payables

2. System creates entries:

   Debit: GRN Accrual              $590
   Credit: Accounts Payable               $590

   (Reverses accrual, creates payable)

3. Invoice appears in payment due list

4. Payment scheduled per terms

Step 6: Make Payment

Responsible Role: Accounts Payable / Treasury

Payment Processing

Same as standard workflow:

1. Review due invoices
2. Create payment batch
3. Generate payment:
   • Bank transfer
   • Check
   • Cash (if petty cash purchase)
4. Post payment
5. Send remittance advice

For detailed payment procedures, see Standard Procurement Workflow - Step 6.

Cash Purchases

If purchased with petty cash:

Petty Cash Reimbursement

1. Staff submits:

   • Original receipt
   • Petty cash claim form
   • GRN number (for reference)

2. AP verifies:

   • Receipt is valid tax invoice
   • GRN exists in system
   • Amount matches

3. Reimburse staff:

   • From petty cash
   • Or via payroll

4. Record in system:

   • Petty cash payment
   • Linked to invoice/GRN

Special Scenarios

Scenario 1: Walk-In Purchase from Hardware Store

Situation: Production machine broke down, need immediate replacement parts.

Process:

1. Maintenance staff:

   • Gets verbal approval from supervisor
   • Drives to hardware store
   • Purchases parts: $350
   • Gets tax invoice/receipt

2. Returns to warehouse:

   • Delivers parts and receipt to warehouse
   • Explains emergency need

3. Warehouse staff:

   • Verifies parts match receipt
   • Creates Direct GRN:
     • Supplier: XYZ Hardware
     • Items: List each part
     • Prices: From receipt
     • Reason: “Emergency machine repair”
     • Approved by: Supervisor name
   • Attaches receipt scan
   • Confirms GRN

4. Immediate use:

   • Issues parts to maintenance work order
   • Links to machine repair job

5. Accounts:

   • Converts GRN to invoice
   • Schedules payment per terms (Net 30)
   • Sends payment to hardware store

Timeline: Purchase to inventory in < 2 hours

Scenario 2: Local Supplier Regular Deliveries

Situation: Daily bread delivery to cafeteria, standing arrangement.

Process:

1. Daily delivery:

   • Supplier delivers bread at 6 AM
   • Leaves delivery note
   • Weekly invoice sent Friday

2. Cafeteria staff:

   • Receives goods
   • Counts items
   • Signs delivery note
   • Gives to warehouse

3. Warehouse (daily):

   • Creates Direct GRN for day’s delivery
   • Supplier: ABC Bakery
   • Items: From delivery note
   • Location: Cafeteria Inventory
   • Confirms GRN

4. Accounts (weekly):

   • Receives supplier’s weekly invoice
   • Matches to week’s GRNs
   • Verifies total
   • Posts invoice
   • Pays weekly/monthly per agreement

Advantage: Daily inventory accuracy without daily invoicing.

Scenario 3: Emergency Equipment Rental

Situation: Need forklift rental for 1 day due to equipment breakdown.

Process:

1. Warehouse manager:

   • Contacts rental company
   • Agrees daily rate: $200
   • Company delivers forklift

2. Receive forklift:

   • Rental agreement signed
   • Forklift in use

3. Create Direct GRN:

   • Supplier: Equipment Rental Co.
   • Item: “Forklift rental - 1 day”
   • Quantity: 1
   • Unit price: $200
   • G/L Account: Equipment Rental Expense
   • Reason: “Emergency - forklift breakdown”
   • Attach rental agreement

4. Invoice processing:

   • Rental company sends invoice next day
   • Match to GRN
   • Post and pay

Note: For service purchases like rentals, Direct GRN documents receipt of service for expense accrual.

Controls and Compliance

Control Points

Even without PO approval, maintain controls:

1. Policy Limits

• Value limits: Per transaction and per period
• Category restrictions: What can be bought directly
• Supplier restrictions: Approved suppliers only

2. Retrospective Review

• Daily review: All direct GRNs by supervisor
• Weekly review: Summary by manager
• Monthly analysis: Spend patterns, policy compliance

3. Documentation Requirements

• Mandatory receipt: No receipt = no GRN
• Justification: Why direct purchase was necessary
• Approval trail: Who authorized purchase

4. Segregation of Duties

• Purchaser: Cannot approve own GRN
• Receiver: Must be different from purchaser
• Processor: AP separate from purchasing/receiving

Compliance Checklist

Before closing month:

• All direct purchases have receipts attached
• All direct GRNs have justification
• All approvals documented
• Policy limits not exceeded
• Supplier tax invoices valid
• Expenses coded to correct accounts
• No duplicate entries
• All invoices matched to GRNs

Reporting and Analysis

Track direct purchase metrics:

Advantages and Limitations

Advantages

Speed:

• No PO approval wait time
• Goods available immediately
• Emergency needs addressed quickly

Simplicity:

• Fewer steps
• Less paperwork
• Faster processing

Flexibility:

• Handle irregular purchases
• Support walk-in buying
• Accommodate last-minute needs

Practicality:

• Matches real-world situations
• Suits small local purchases
• Reduces administrative burden

Limitations

Reduced Control:

• No pre-approval of spend
• Harder to enforce budgets
• Risk of unauthorized purchases

Less Visibility:

• No advance notice of commitment
• Harder to track pending spend
• Cash flow forecasting gaps

Audit Challenges:

• Retrospective justification harder
• Risk of missing documentation
• More manual review needed

Risk of Misuse:

• Personal purchases disguised as business
• Favoring certain suppliers without quotes
• Circumventing normal approval processes

Best Practices

For Staff Making Direct Purchases

1. Always get approval before purchase (even if verbal)
2. Get proper tax invoice at time of purchase
3. Keep all documentation together
4. Deliver to warehouse same day
5. Explain urgency clearly for retrospective review

For Warehouse Staff

1. Process GRN same day as receipt
2. Verify with purchaser if unexpected delivery
3. Check receipt matches goods received
4. Attach documentation before confirming
5. Alert manager if something seems irregular

For Accounts Payable

1. Match invoice to GRN within 1 day
2. Verify receipt attached (no receipt = query)
3. Check justification is reasonable
4. Flag policy breaches for review
5. Process payment per normal terms

For Managers

1. Review daily all direct GRNs
2. Question unusual purchases
3. Enforce policies consistently
4. Analyze patterns monthly
5. Adjust policies based on actual needs

Transitioning from Direct GRN

When to move to Standard Procurement:

Indicators for Change

Move to Standard PO if:

• Same supplier being used frequently (>5 times/month)
• Regular predictable needs
• Value increasing significantly
• Need better price negotiation
• Budget control becoming important

Example Transition:

• Month 1-3: Direct GRN for office supplies from local supplier
• Month 4: Realize spending $2,000/month
• Action: Negotiate monthly contract, implement blanket PO
• Result: Better pricing, controlled budget, maintained convenience

Related Documentation

Similar Workflows

• Standard Procurement Workflow - Full PO process
• Direct Invoice Workflow - Skip GRN too

Daily Operations

• Goods Received Note Processing - Detailed GRN procedures
• Purchase Invoice Processing - Invoice matching

Setup and Configuration

• Purchasing Module - Module overview
• Inventory Module - Stock management
• Supplier Maintenance - Supplier setup