What is a Sales Order? | Complete Guide

Companies create sales orders to confirm purchases. Usually, this occurs after the customer expresses a need for the goods or after the agreed-upon shipment date has passed. Making-to-order transactions require this form of documentation.

The sales order also creates a database of customers for expedited order processing.

What are the Types of Sales Orders?

In this subsection, we'll talk about 4 common types of sales orders that are especially needed for businesses. Let's consider each of them separately and in detail.

Cash Sales

Sales orders in which the customer picks up and pays for his/her order are called Cash Sales. Whenever cash is paid for the order, delivery happens immediately after it is entered.

Rush Sales Order

With a Rush Sales Order, the customer's needs are met the same day the order is placed. In this case, we complete the order faster than usual and pay for it later.

Third-Party Sales Order

This method makes the delivery through a third-party vendor rather than directly to the customer. After that, the service provider delivers the product to the customer. It's common for a small business to experience this.

Scheduling Agreement

Scheduling agreement specifies the delivery dates and quantities schedule. The data is represented in the form of schedule lines in an external agreement. This type of sales order is processed similarly to regular deliveries.

What is the Purpose of a Sales Order?

The seller issues a sales order to a buyer, confirming the order placed by the buyer about goods on offer. It ensures that the seller can deliver the requested goods to the buyer after reviewing the terms and requirements of the purchase order.

  • Maintains inventory records.
  • Identifies the need for reordering to companies.
  • Provides proof in any case.
  • Reducing the risk in accounting processes through record-keeping.

What are the Mandatory Details that Sales Order should Include?

Here are the particulars we should take into account for issuing a Sales Order Document:

  • Name, contact information and address of the seller
  • Name, contact information and address of the buyer
  • All the necessary information about Billing and shipping addresses
  • Descriptions of the goods or services
  • Value of the sale and the products after-tax
  • Expenses associated with shipping, packaging, delivery, and taxes.
  • Terms and conditions

How the Process of Issuing Sales Orders looks like?

  • The buyer sends a Request For Quote (RFQ) from a seller.
  • After receiving a Request For Quote (RFQ), a seller will send it back to the buyer.
  • The buyer checks if the quote is proper, and afterwards, he/she sends a purchase order to the seller.
  • The seller issues a sales order according to the details given in the purchase order.
  • The seller sends the sales order to the buyer to accept the terms and conditions. Only afterwards delivery is carried out.
  • The seller issues the invoice based on the sales order.
  • After receiving the invoice from the seller, the buyer makes a payment.

Sales Orders and Tax Invoices: What are the Differences?

The table below details the differences between a Tax Invoice and a Sales Order:

If you want to know more about the differences between Tax Invoice and Sales Order, read the article Difference Between A Sales Order and A Tax Invoice.

Sales Orders and Purchase Orders: What are the Differences?

The following table will help you understand the specific differences between a Sales Order and a Purchase Order: