Sales order definition
/What is a Sales Order?
A sales order is a document generated by a seller for its internal use in processing a customer order. The document essentially translates the format of the purchase order received from the customer into the format used by the seller. The sales order is then used for a variety of purposes, including credit approval by the credit department, initiating a work order for unit construction, and initiating a picking operation to take goods from stock.
A sales order is stored as an electronic document, if a company has an electronic order processing system. This makes it easier for anyone in the company with authorization to access the record. If the system is manual, then multiple copies must be created and distributed around the company.
Characteristics of a Sales Order
The key characteristics of a sales order are as follows:
Customer-centric document. A sales order is a formal document confirming a customer’s request for goods or services.
Generated after sales agreement. A sales order is created after a quotation is accepted but before order fulfillment.
Contains key order details. A sales order includes product/service description, quantity, price, delivery date, and payment terms.
Unique order number. A sales order is assigned a specific sales order (SO) number for tracking and reference.
Used for production planning. A sales order helps businesses manage stock levels and plan order fulfillment efficiently.
Triggers the billing process. A sales order is often used to generate an invoice after goods/services are delivered.
Can be modified or cancelled. Subject to terms and conditions, some sales orders allow modifications or cancellations.
Sales Order vs. Purchase Order
A sales order is an internal document that a supplier uses to process a purchase order received from a customer. The key differences between the two documents are as follows:
Origination. A sales order is created by a supplier’s order entry department, while a purchase order is created by the customer’s purchasing department.
Usage. A sales order is intended to be used internally, to assist in processing a customer’s order. A purchase order is a legal authorization issued by a customer to a supplier, for the supplier to ship it the goods specified in the document.