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During the ordinary course of business, companies often receive goods that they’ve purchased before the supplier sends an invoice. For businesses that use a perpetual inventory recording system, the goods are deemed as received, and as such, must be recorded in the company’s inventory.
Because the goods are received before the invoice from the supplier, the accounts payable are not updated. As such, a GRNI account is maintained. The GRNI account helps businesses manage current liabilities for which a corresponding invoice has not yet been generated.
Good Received Not Invoice (GRNI) is simply a record in the accounting system which shows that a certain amount of goods received have no corresponding invoice, though they’ve probably matched to a corresponding purchase order.
A GRNI is an adjustment (contra) account and is shown as a current liability on the company’s balance sheet. Businesses that use a periodic inventory system do not record goods as received until an invoice is received or the accounting period ends, so they don’t need a GRNI account.
To better understand the GRNI account, here’s an example:
Company X uses a perpetual inventory system, and purchases goods worth $2,000 from Company Y.
The goods arrive before the invoice from Company Y.
To reflect goods receipt in the general ledger, the following entry will be made:
DEBIT CREDIT
Inventory $2,000
GRNI $2,000
Since an invoice hasn’t been received, it’s important to create a liability and credit the GRNI account instead of accounts payable. Inventory is debited to reflect the goods received.
Once the supplier’s invoice is received by the business, the liability is transferred from the GRNI to the accounts payable. The general ledger is updated with another entry, as shown below:
DEBIT CREDIT
GRNI $2,000
Accounts Payable $2,000
This brings the GRNI account to zero and increases the accounts payable, accurately reflecting the payment to be made for the goods received. GRNI reconciliation is often error-prone, which is why most businesses rely on automated, cloud-based procurement software.
Leveraging artificial intelligence, procurement software is able to generate accurate GRNI reports on time, eliminating human error, saving time and expenditure. In most transactions, the invoice is to arrive before a 3-way match is complete, so most transactions do appear on the GRNI every now and then.
If an invoice has not been received for several months even after goods were received, it could indicate an issue. A high GRNI also indicates issues with the procure-to-pay process used by the company. Several factors could cause the GRNI balance to increase, including:
Auditors and accountants are likely to pay attention to overstated GRNI balances to figure out why invoices have not been received.
Overstated GRNIs can be corrected by reviewing problem suppliers to figure out why invoices are not being sent. You can also check whether POs are matched to invoices and receipts and rectify issues.
During the ordinary course of business, companies often receive goods that they’ve purchased before the supplier sends an invoice. For businesses that use a perpetual inventory recording system, the goods are deemed as received, and as such, must be recorded in the company’s inventory.
Because the goods are received before the invoice from the supplier, the accounts payable are not updated. As such, a GRNI account is maintained. The GRNI account helps businesses manage current liabilities for which a corresponding invoice has not yet been generated.
GRNI is simply a record in the accounting system which shows that a certain amount of goods received have no corresponding invoice, though they’ve probably matched to a corresponding purchase order.
A GRNI is an adjustment (contra) account and is shown as a current liability on the company’s balance sheet. Businesses that use a periodic inventory system do not record goods as received until an invoice is received or the accounting period ends, so they don’t need a GRNI account.
To better understand the GRNI account, here’s an example:
Company X uses a perpetual inventory system, and purchases goods worth $2,000 from Company Y. The goods arrive before the invoice from Company Y. To reflect goods receipt in the general ledger, the following entry will be made:
DEBIT CREDIT
Inventory $2,000
GRNI $2,000
Since an invoice hasn’t been received, it’s important to create a liability and credit the GRNI account instead of accounts payable. Inventory is debited to reflect the goods received.
Once the supplier’s invoice is received by the business, the liability is transferred from the GRNI to the accounts payable. The general ledger is updated with another entry, as shown below:
DEBIT CREDIT
GRNI $2,000
Accounts Payable $2,000
This brings the GRNI account to zero and increases the accounts payable, accurately reflecting the payment to be made for the goods received. GRNI reconciliation is often error-prone, which is why most businesses rely on automated, cloud-based procurement software.
Leveraging artificial intelligence, procurement software is able to generate accurate GRNI reports on time, eliminating human error, saving time and expenditure. In most transactions, the invoice is to arrive before a 3-way match is complete, so most transactions do appear on the GRNI every now and then.
If an invoice has not been received for several months even after goods were received, it could indicate an issue. A high GRNI also indicates issues with the procure-to-pay process used by the company. Several factors could cause the GRNI balance to increase, including:
Auditors and accountants are likely to pay attention to overstated GRNI balances to figure out why invoices have not been received.
Overstated GRNIs can be corrected by reviewing problem suppliers to figure out why invoices are not being sent. You can also check whether POs are matched to invoices and receipts and rectify issues.