What is a Sales Order? The Benefits of Sales Order Automation

What is a sales order?

The Sales Order sometimes abbreviated as SO, is a document generated by the seller upon receiving a purchase order from a buyer specifying the details about the service or product along with quantity, price, buyer details like the mode of payment, billing address, shipping address, and terms and conditions (T&C). Businesses use SO as a confirmation document that is sent to the customers before delivery of products or services.

Businesses follow the below steps to create Sales Order –

The seller sends a sales quote to the customer.
If SO is accepted, then the customer sends the seller a purchase order.
The seller creates a SO based on the purchase order from the customer.
The customer may request a SO to view the specific details of the products, price, terms and delivery dates, billing/shipping address.
After the products are shipped by the seller, they create an invoice from the sales order (SO).

Why is Sales Order Important?

If you are a vendor, sales orders are critical for keeping track of all your inventories. It will allow you and your business to stay on top of what you have in stock, what you have on backorder, and what you may need to purchase from your distributors. Concurring to the terms of a purchase order usually makes a deal legally binding. If you have questions about a purchase order you have pending, seek legal counsel before signing. Maintaining detailed records of all your sales orders will help ensure that you can convey those agreements.

Sales orders are also central for reducing the risk of material misstatement in your company’s financial reporting. Material misstatement is any kind of inaccuracy in a financial statement that might importantly impact the financial decisions of anyone depending on that information of the statement. Material misstatements in reporting inventory balances will have some very real consequences.

For example, misstating ending inventory might blow up or reduce the profits of your company, and as you can assume, neither of those end results will look good if you are being audited. That is the reason why it’s completely crucial to maintain precise records of your sales orders to catch any potential material misstatement during an internal audit.

Difference between a SO (sales order) and a (PO) purchase order

The below-mentioned points are substantial so far as the difference between sales order and purchase order is concerned:

When the Sales Order is accepted by the buyer, it approves the sale. On the other hand, when Purchase Order is accepted, it becomes a binding contract between a buyer and a seller.
With the help of Sales Order the buyer can know the date, time, and mode of delivery of goods and services and payment; while the help of PO, the buyer can place an order for goods and services.
The supplier issues the Sales Order to the buyer, whereas Purchase Order is prepared by the buyer and is sent to the supplier of goods and services.

Comparison Chart

BASIS FOR COMPARISON	SALES ORDER (SO)	PURCHASE ORDER (PO)
Meaning	Sales order is a document used for confirmation of sale.	Purchase order is a document used for ordering products or services.
Details	SO is issued by the supplier to its buyer before delivery.	PO is prepared by the buyer and is sent to the supplier.
Effect Of Acceptance	It approves the sale, if accepted by the buyer	Creates a formal contract between the buyer and supplier

The value of a Sales Order

Sales orders are crucial to order and inventory management systems. Whenever a customer sends you a purchase order or places an order on your e-commerce(online) store, your business becomes accountable to fulfill the order.

A sales order provides you information on your inventory status. It shows whether the products are in stock, and if not how many are on backorder. With this information, it allows your purchase department to make educated forecasts and purchase from your distributors.

Make an entry of a sales order into your system as soon as possible. Do not make mistake by using the purchase order as a sales order as this will result in chaos in the future not only with your purchasing department but also in accounting.

To verify related details and the authenticity of the sale the billing department refers to the sales orders and then generates invoices. Businesses have automated the process of creation of invoices by converting sale orders to invoices. Mistakes in quantity and pricing in the sales order will lead to miscalculations in accounting.

Financial auditors often inquire about sales order documents, when reviewing a company’s financial statements. Working capital loans are also provided based on the confirmed sales order value of a business. Check here, features of Online Sales Order Management software.

Advantages of Sales Order Automation

#Streamline Work Time

Sales teams mostly observe paperwork to be a time-consuming factor of their responsibilities. Sales order automation systems effectively import or transform customer purchase orders, creating effortless integration with your ERP software. Such eradicates the requirement for information re-entry from purchase orders, imperatively minimizing time and effort. The one-time information entry advantages multiple departments, involving sales, warehousing, procurement, invoicing, accounting, and customer service.

#Enhance Customer Service

Encourage your sales team representatives with prompt access to essential customer information, removing the requirements to refine through extensive paperwork. Prompt and effective resolution of customer inquiry becomes feasible through sales order automation. The minimization of mistakes and inconsistencies connected to customer orders and billing results in elevated customer satisfaction.

#Seamless Scalability

Sales order automation enables for streamlined scalability without concerns about capacity or capability. As orders tend to rise, prompt processing becomes possible without an immediate requirement to elevate your customer service staff.

#Anywhere, Anytime Data Processing

Online applications deliver the flexibility to access detailings and process information from any location at any time. Sales team representatives can access associated information during sales calls independently, minimizing dependency on internal sales team reps for information. Such leads to improved efficiency and agility, ultimately providing enough customer satisfaction.

An Inventory manager can have a look at the Sales Order once it is created, to know what needs to be shipped/delivered and when. How Sales Orders work, kindly refer to the image below to understand.

Sample of Sales Order Template

Working with Sales Orders

The Sales Order is an approval document sent to the buyers before delivering the products or services. Sales Order can be created once the quotation/quote is accepted by your prospective customer and the Purchase Order is sent by the buyer to the seller for further processing. Once the PO is received, the buyers may request SOs to know the specific date of delivery of the products or services. Further, the inventory/production department checks the list of Sales Orders to know what needs to be shipped out and when. When the order is shipped and delivered to the buyer, an invoice is generated from the sales order for billing purposes. Generally, SO (sales order) contains the #SO number, date, line items (products/services) including the quantities and prices based on the PO, Shipping address, Billing address, and the Terms & Conditions.

Outcome

The sales order automation system helps to establish workflow and minimizes processing time, starting from point of sale to verification to inventory management to delivery and long-term customer retention. Almost about 50%, it reduces order processing times which means that the number of orders can be processed in the same timeframe.
The perfect cloud-based sales order processing software can take your business places. If you want these benefits, contact SalesBabu Online Business Solutions today.