Now that the truss rod is adjusted, the string action at the bridge is adjusted, and nut slots are dialed in, you can now do the last step of the setup, which is to adjust intonation.
Tuning fretted instruments
Fretted instruments have equal temperament by design, and therefore have limitations when it comes to tuning. By this I mean that the tuning of each individual note is a function of the fret location on the fretboard. Fretless basses would be the exception to the rule, in that the player is intonating as they play. The same is true with stringed instruments like violins and cellos.
Since you are unable to move the actual frets, you have to make sure the instrument stays in tune up and down the entire span of frets by making adjustments at the bridge saddles.
The rule of thumb here is that a string, when struck at the 12th fret, should produce a tone exactly one octave above the open note on the same string. If I play the open high E string, the 12th fret E an octave above it on the same string should also be in tune. Players all want the same thing, and that is a guitar that plays in tune and stays in tune. Good intonation is mandatory in making this happen.
Use a strobe tuner
Put the entire guitar up to pitch using a strobe tuner at the open notes. Then check to see if the strike note at the 12th fret on each string is perfectly in tune with the open strings. If the 12th fret note reads a little sharp on the strobe tuner, move the saddle back and away from the nut, therefore lengthening the string. Then retune the open string and check again until it’s perfect. If the 12th fret note reads a little flat on the strobe tuner, move the saddle toward the nut, therefore shortening the length of the string. Then retune the open string and check again until it’s perfect.
On most guitars with separate saddles this will be an easy process. But it’s a little more difficult on bridges where two or three strings share the same saddle (such as barrel bridges on a Telecaster) or on acoustic guitars with a fixed bridge. On Telecaster bridges you will make adjustments until both strings are as close to in tune at the 12th fret as possible. Sometimes you will not be able to perfectly intonate these guitars because of the limitations of the bridge saddle design. However, you can always recommend changing saddles to something that intonates a little better, such as angled saddles.
Limitations of wrap-tail bridges
On vintage wrap-tail bridges, you will also have limitations in the design. I have found that it is best to intonate the high and low E strings and then let the rest go as they are. Archtop guitars with a floating bridge design will be very similar to wrap-tails. You can physically move the bridge to the correct intonation point. Be sure to slack the strings before moving the bridge base over the top, as the downward string tension might scratch the finish. On acoustic guitars, you will have the most severe intonation adjustment limitations, as the bridge saddle slot is routed at the factory and you will not be able to move the bridge saddle to intonate.
In most cases, if the neck and nut slots are adjusted properly with a reasonable string action and good neck angle, then the guitar should play in tune up the neck. If the setup is good up to the intonation step, then it’s possible that you might have to cut a new saddle that will move the strings closer to proper intonation (like an acoustic saddle with a notched B string to compensate for the string gauges). If severely off, then you might have to fill and recut the saddle slot. Both of these examples would obviously be in the category of “repair” work and therefore beyond the scope of a simple setup.
Check your tuning job
After the intonation is set with a strobe tuner, check to make sure that the guitar is really intonated correctly by playing octaves in the upper register. I like to play octaves, skipping strings at the 12th fret, just to hear if there is any “wobble” in the tuning or if something is not right (12th fret low E and 14th fret on D, for example). You always want to double-check your work and make sure that the guitar really does play in tune.