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Sales Order
Sales orders are an essential requisite for any sales transaction that takes place. The document contains the specifics of the transaction, including the period within which the goods will reach the customer.
Meaning of sales orders and their uses
A sales order is a document of commercial nature issued to a customer, confirming the order placed by the buyer about goods on offer. The seller prepares it. The sales order indicates that the seller has looked over the terms and requirements of the purchase order and is confirming the ability to deliver the requested goods to the buyer.
- Helps to keep track of inventory
- Helps the businessman determine to reorder levels
- Serves as proof in any event necessary
- Enables better maintenance of records, thus reducing the risk of misstatements in the financial statements.
Format, contents, and template of sales orders
A general sales order format will contain the following information-
- Name of the seller and customer along with their address and contact information
- Billing and shipping related information
- Details of the goods or services
- Value of the sale
- Charges concerning shipping, packaging, delivery and taxes
- Value of the products after tax
- Terms and conditions of the sale, if any
- Any other information
Process of issuing sales orders
- The customer sends a Request For Quote (RFQ) from a vendor.
- Once the RFQ is received, the RFQ is sent back by the vendor.
- The customer checks to see if the quote is reasonable. Once it is found reasonable, a purchase order is sent to the vendor.
- On receipt of the purchase order, the vendor generates a sales order based on the details and information in the purchase order.
- The vendor sends the sales order to the customer to confirm the terms of the sale.
- The vendor then proceeds to get the goods ready for delivery to the customer.
- The vendor generates the invoice for sale using the information in the sales order as the input.
- The customer pays the dues on receipt of the invoice from the seller. The payment is made through an accepted mode of payment.
Comparison between sales orders and purchase orders
| SALES ORDERS | PURCHASE ORDERS |
|---|---|
| A written document sent by the seller to the buyer confirming the delivery of the goods requested by the buyer | A written document sent by the buyer to the seller specifies the details of the goods required by the buyer |
| Created by the seller | Created by the buyer |
| Created to confirm the sale before the delivery is executed. | Created to enquire about the availability of goods and place an order for them |
| Not legally binding - just for approval of the sale | Legally binding document |
Comparison between sales orders and invoices
| SALES ORDERS | INVOICES |
|---|---|
| Document confirming that the goods requested by the buyer will be supplied and delivered by the seller. | Documents are created by the seller, ensuring that the sale has taken place and requesting payment from a buyer concerning goods purchased from the seller. |
| Usually created at the beginning of the sale transaction. | Usually made at the end of the sale transaction. |
| Does the seller use internal documents for tracking purposes? | It is a document of financial nature, thus will be recorded in the general ledger. |
| Sales orders confirm all the seller’s work to deliver the goods to the buyer. | Invoices inform the buyer of the payment for the goods availed. |
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