What is a sales order used for?
The sales order, sometimes abbreviated as SO, is an order issued by a business or sole trader to a customer. A sales order may be for products and/or services. Given the wide variety of businesses, this means that the orders can be fulfilled in several ways. Broadly, the fulfillment modes, based on the relationship between the order receipt and production, are as follows: Show
A sales order is an internal document of the company, meaning it is generated by the company itself. A sales order should record the customer's originating purchase order which is an external document. Rather than using the customer's purchase order document, an internal sales order form allows the internal audit control of completeness to be monitored. A sequential sales order number may be used by the company for its sales order documents. The customer's PO is the originating document which triggers the creation of the sales order. A sales order, being an internal document, can therefore contain many customer purchase orders under it. In a manufacturing environment, a sales order can be converted into a work order to show that work is about to begin to manufacture, build or engineer the products the customer wants. Electronic sales order[edit]Many sales orders are no longer paper-based, but rather transmitted electronically over a corporate Intranet. These sales orders may be communicated across different enterprise business applications. The automated sales and purchase order process enables customers to place orders 24/7, even when offices are closed. Common types[edit]
Customer order fulfillment[edit]The steps involved in fulfilling the demands made in a sales order make up the order fulfillment process. See also[edit]
April 05, 2022/ Steven Bragg
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. Getting your company’s product or service into the hands of customers is your lifeblood. But sales order processing has proven to be the downfall of many businesses. Errors, out-of-stock items, and slow cash flow can all hurt your performance. This article serves as a crash course on how to achieve efficient sales order processing, and includes templates and examples as well as insights on using technology to solve common sales order process problems. Sales order processing is the sequence of actions that a business follows to fulfill a customer purchase. Today, sales order processing is often aided by technology, which ensures that each touchpoint on the seller’s side — from billing to production and logistics — has the information needed to execute a customer order efficiently. When a customer clicks “buy” on a website or phones in an order, the purchaser initiates a complex chain of communications that involves many of a company’s departments. Despite the complexity of this process and the volume of orders that a seller handles, customers expect their purchases to be at their doorsteps or warehouses quickly — and their goods usually are, thanks to sales order processing. To understand efficient sales order processing, we need to back up and look at the sales order itself, its purpose, and how it relates to some other order documents. What Is a Sales Order?The sales order confirms the terms of a transaction between a buyer and seller. The seller generates the order, often in response to a purchase order. The seller may send this document to the customer or rely on it solely for internal use. The sales order details the quantity, price, delivery time frame, and more. What Is the Difference Between a Sales Order and a Purchase Order?The seller generates a sales order upon receiving a purchase order from the customer. While these terms sound very similar, they differ in terms of who generates them and their purpose.
Once you generate a sales order, the purchase is considered legally binding, and no further negotiation is allowed. What Is the Difference Between an Invoice and a Sales Order?The sales order confirms the details of the customer’s purchase, while the invoice acts as a bill, specifying money due and terms. The seller creates a sales order early in the purchase process, once both parties agree to a deal. An invoice comes later. Depending on the terms, the buyer pays the invoice in one of a variety of ways: before the seller ships the goods, upon receipt, or within a certain amount of time after delivery, such as 30 days. The finance or accounting department needs to track both sales orders and invoices and make sure they reconcile. In some enterprise resource planning (ERP) systems, you use sales orders to track stock, and you use invoices when stock-tracking is not necessary. The invoice also serves as the customer’s proof of purchase and may be needed to document business expenses for tax purposes or to make a warranty or service claim if there is a problem with the items purchased. What Is a Sales Order Acknowledgement?A sales order acknowledgement is sometimes called a sales confirmation. This document communicates to a customer that the seller has received an order. The sales acknowledgement or confirmation is standard practice with online orders in which the seller’s system immediately triggers an email once an order enters said system and confirms to the buyer that everything is in order. The sales order acknowledgement also often functions as a reminder to the buyer of what they ordered, and buyers frequently discover errors in an initial check of the order confirmation. Upon reviewing this form, the buyer may realize that he has entered the wrong size or quantity, so issuing an order acknowledgement can help catch mistakes early in the sales order process. If you want to create your own acknowledgement form, it should contain various pieces of information: the seller’s and buyer’s names and addresses, the order number, the customer ID, the date of receipt of the order, the shipping details; the payment information, an itemized list of what the buyer is buying, the total amount due (with taxes), and any other terms of the order. There’s also a stamp or digital signature for authenticity. Since a sales order acknowledgement contains information that’s already part of the sales order processing system, you can easily automate the creation of this document. If you want to use your own, download this sales order acknowledgement template that enables you to enter the product, quantity, price, customer details, and more information.
Download Sales Order Acknowledgement Template Excel l Word | PDF Key Terms and Roles in Sales Order ProcessingAs we explore sales order processing, you’ll want to be familiar with some key terminology and roles:
Key participants in sales order processing include customer service reps and an order desk or team. Key account sales staff, sales order administrators, sales order management specialists, and order fulfillment specialists also support the process. They help make sure that the company handles order inquiries correctly, that pricing and product availability are up to date, and that employees fill orders properly. Sales accounting is a specialized area of expertise, and some bodies, such as the Association of Accounting Technicians, offer sales order processing training as part of the certification process. The Evolution of Sales Order ProcessingTying many operations together, sales order processing is the workflow behind what sellers hope is the seamless execution of a customer purchase. Sales order processing was historically a manual operation that depended on a lot of paper. As organizations went digital, the act of automating sales order processing often lagged behind other operations, notably among business-to-business (B2B) sellers. Consumer-focused sellers, such as online retailers, have been at the forefront of using automated sales order processing to achieve greater efficiency. More sellers of all kinds are now embracing these techniques, although orders for very expensive and custom items with exacting specifications may still be processed manually. Let’s look at how sales order processing transitioned from manual to digital for B2B sellers. Many organizations that used automated systems for handling certain types of structured data, such as finance and customer relationship management (CRM), continued to rely on a manual process for creating a new sales order. The former data system would generate quotes, orders, and invoices, and the latter handled customer information and sales history. However, frequently there was no system to automate the authorization and routing of new sales orders. At this stage, many companies would manually enter purchase orders as sales orders in their ERP systems. But, this method is slow, leaves room for error, and has high administrative costs. An array of internal departments will have contact with an order. Finance departments, for instance, raise an invoice and production, both of which ensure that the goods are manufactured. Any manual checkpoints slow the process. Additional processing time becomes a competitive disadvantage. Customers have lots of options, and they want to buy from sellers who make the work quick and painless. Manual order processing can be frustrating for customers. The first automated order processing solutions used optical character recognition (OCR) to extract information from paper forms and turn it into electronic data. Electronic data interchange systems also started filling in the gaps. Sales order processing applications automatically enter EDI orders, convert them into a human-readable format, and flag anything that needs to be checked by a service rep. Cloud computing hastened the rise of fully automated sales order processing platforms, which integrate with other business solutions, such as ERP and CRM platforms. What Is Sales Order Management?Automated sales order processing has made it possible for companies to optimize sales order handling and has given rise to a function called sales order management, which broadly refers to the management of orders from inception to execution using a single system. The Fundamentals of Sales Order ManagementBy using technology to make order processing more efficient, managers can see in real time what is happening at every stage of the order cycle and track key performance indicators (KPIs) on performance. Sales order management has become more important as companies have gained insight into this information and started to view order processing costs as a variable that they can control. Previously, companies would simply lump in these costs with overhead. Order management aggregates different internal data — everything from product details and availability to order processing status and expected delivery dates — to provide a comprehensive monitoring system for sales orders. The addition of more sales channels makes order management more critical. Moreover, customers are becoming accustomed to having visibility into the progress of their order fulfillment, and sellers can only provide this visibility if they use integrated sales order processing and management systems. With centralized order management comes increased ease of order control, monitoring, and modification across multiple sales channels. Order management strengthens an organization’s ability to handle fluctuations in demand, economic cycles, and changes in buyer tastes. How Omni-Channel Shopping Changes Sales Order ProcessingOn top of the movement toward business process automation, another trend has reshaped sales order processing. The big shift toward e-commerce and shopping on mobile devices, especially for business-to-consumer (B2C) selling, makes sales order processing more difficult, therefore demanding better solutions. These days, orders can come in person, over the phone, or via B2B, EDI systems, email, mail, fax, or online. What’s more, there are also a variety of different ways to pick up and return products. For sellers, this phenomenon has sparked an omni-channel approach, which means an effort to make the customer’s experience the same — seamless and easy — no matter how they buy. While it makes sense that sellers would want all buyer interactions to be consistent and logical, beneath the surface, this trend has sometimes required massive changes for sellers. Frequently, they have had to tack e-commerce solutions onto legacy fulfillment processes for physical stores or catalogues and had to revamp systems to harmonize them. For example, customers who prefer to order online would find it frustrating to discover that they could receive a purchase more quickly if they ordered by phone instead. From the seller’s side, this lag might occur because historically, companies have routed orders to a particular warehouse, entailing longer transit times for some customers, depending on their location. To embrace omni-channel shopping, sellers have had to optimize fulfillment equally for all channels. In B2B transactions, omni-channel also means that buyers do not want to take extra steps to interface with sellers’ systems. If the buyer’s internal protocol is to generate a sales order, they do not want to spend additional time entering it on a seller’s website. So, sellers need to make sure that their systems can accept orders in all the forms in which buyers want to send them. Offering more ordering avenues grants greater convenience to customers and can lead to a bigger customer base and more orders. But, with orders coming in so many different ways, sales order processing is becoming much more complex — and much more error prone. The different order streams can raise challenges to fulfilling customer purchases on time, in sequence, and correctly. The Benefits of Automated Sales Order ProcessingSales order processing systems make it possible to manage orders from receipt to fulfilment using a single platform. This capability corresponds to orders from all channels: online, direct sales, and major accounts. Compared to manual sales order processing, automation offers several key benefits:
The Sales Order Processing WorkflowAutomated sales order processing provides a workflow that moves customer purchases through every stage, from receipt to fulfillment, with limited manual intervention. This process applies except when you want to build in checkpoints for approval or monitoring. These systems centralize and digitalize information, minimizing the creation and handling of paper documents. The workflow ensures that each department progresses seamlessly through their part of the process. Here are the main steps in the workflow:
Common Problems in Sales Order ProcessingWhile mistakes are inevitable, the goal of effective sales order processing is to minimize them. So, watch for the following most common sources of error:
Do You Need an Automated Sales Order Processing System?Because new technology is often a significant investment, you will want to consider carefully whether it’s worthwhile. Here are the signs that you would benefit from automating sales order processing:
Templates and Examples for Sales Order FormsIf your company is small, automated sales order processing may be overkill. As long as your order volume stays low and your product selection remains limited, you can get by with standardized forms. Ideally, you will want a form that is editable, customizable, and printable. We’ve created a sales order template for you to download. Organized around physical goods, this template has fields for you to record details on the buyer, seller, product, quantities, price, and more.
Download Sales Order Template - Excel Excel | Smartsheet You can also find generic forms from office supply houses. Check to be sure that they are formatted to accommodate important information:
How to Make Your Own Sales Order Form in ExcelYou may ultimately prefer to make your own sales order form. Follow these step-by-step instructions to build an order form in Excel. 1. Create the Workbook: Open Excel and create a new workbook. Double click on Sheet1 and name it Order Form. Next, click the + on the tab next to Sheet1 to open Sheet2. Double-click on Sheet2 and name it Products.
2. Build the List of Products or Services: Create a lookup table for the products and prices.
3. Name the Entire Table: Select the cells for your table (without the headers) in columns A and B. In this example, cells A2:B5 are selected.
4. Begin the Order Form: Click on the Order Form tab and enter the title Order Form in cell B2. Format the font and size using the dropdown menus in the Home tab. Then, do the following:
5. Build Dropdowns for Products: Create dropdown lists on the Order Form sheet to easily enter a product.
6. Create the Price Lookup: Enter the following formula in cell C10 to fetch the product price: =IF(B10="","",VLOOKUP(B10,ProductTable,2,FALSE)) Hit Enter on your keyboard. This formula uses the functions VLOOKUP and IF. Breaking this formula down:
Copy cell C10 and paste it down through the rest of column C. This will ensure that each cell in column C looks back at the preceding cell in Column B to compare against the product table.
To test this formula, select a product from the dropdown list to enter in cell B10. Two conditions should hold true:
7. Generate the Total for the Row: In cell E10, enter the following formula: =IF(C10="","",C10*D10) Hit Enter on your keyboard. This formula uses the IF and simple multiplication functions:
Copy cell E10 and paste the formula through cells E11:E18. To check this formula, enter a quantity of the product listed in cell B10. The total for that product and quantity should be calculated in the cell.
8. Totaling the Order: Use the SUM function to total the relevant rows in the Order Form. For example, you would want to know the total quantity of products ordered and the total cost. On the Order Form worksheet, enter the following formula in cell D19: =SUM(D10:D18) Hit Enter on your keyboard. This formula totals the quantity cells. Copy cell D19 and paste it in cell E19 for the total cost of the order form.
9. Add Optional Customer List: If you want, you can include a sheet with customer information, using the skills you learned in this section. When you choose a customer name on the Order Form, the details will automatically populate.
In the Order Form worksheet, create a space to enter the customer name by entering Ship To: in cell B4. Select cell B5, click Data Validation from the Data tab, and in the pop-up box under Allow, select List. In the source box on the pop-up, type =CustomerList.
This restricts the name of the customer entered in cell B5 to what is listed on the CustomerList worksheet.
=IF(B5="","",VLOOKUP(B5,CustomerTable,2,FALSE))
=IF(B5="","",VLOOKUP(B5,CustomerTable,3,FALSE)&", " &VLOOKUP(B5,CustomerTable,4,FALSE)&" " &VLOOKUP(B5,CustomerTable,5,FALSE)) To check this formula, enter a customer name from the dropdown menu in cell B5. Cells B6 and B7 should automatically update to reflect the address, city, state, and zip.
How to Choose a Sales Order Processing SystemIf you have decided to upgrade to automated sales order processing, you will need to evaluate your needs and potential solutions carefully, since any change will affect the revenue-generating heart of your organization. Of course, a sales order processing solution needs to handle sales orders, but most systems will automate multiple business processes and allow for inter-departmental collaboration on a single platform. You may want a solution that links to your sales technology. For example, in addition to the standard approval of sales orders, an automated system may allow you to assign a source of supply, change labor resources for service items, and create projects out of work you sell to customers directly from their sales orders. Sales order applications integrate with the accounting modules of finance and ERP systems. An ideal solution will also integrate with existing business applications — such as ERP systems — at little or no additional cost. However, it’s ideal that your sales order processing system maintain a distinct web-hosted workflow that is remotely accessible, so tasks like authorizing sales orders are not delayed if a sales manager is out of the office. For these reasons, cloud or web-based sales order processing solutions are growing in popularity. Depending on the size and complexity of a selling business, here are some of the other features a sales processing system might include:
Making the Case for Automated Sales Order ProcessingIf you are considering purchasing a sales order processing solution, you will need to build a business case for it. The argument in favor of an automated sales order processing system rests on the benefits we discussed earlier, namely faster processing, fewer mistakes, and an accelerated order-to-cash cycle. The easiest way to get important stakeholders on board is first to document the current system — or, to be specific, to document what the current system is getting wrong. Persistent errors, especially errors of a specific type, can spotlight the need for an automated system. Be sure to calculate the costs of mistakes, especially in the case of orders that need to be returned or replaced. An automated system reduces avoidable mistakes and lowers the related costs. A more detailed method of documenting the current system is to map it in a flowchart, complete with the durations of each stage and the numbers of items or orders at each stage, so you can identify bottlenecks. Manual touchpoints tend to be magnets for bottlenecking, and you can usually eliminate them. Set goals for automation, such as a specific decrease in labor costs or returns. Ask vendors for case studies of organizations that fit your profile and have documented results. As you build your case, you will want to appeal to every department, and different reasons will be most persuasive for each. For some teams, like customer service reps, manual sales order processing is a huge drain on their time. IT departments may worry about not having enough resources to support a new system, but you can point out that the solution will automate the handling of EDI orders, a frequent source of IT headaches. For the C-suite, start by enumerating tangible benefits, such as costs, error numbers, returns, order-to-cash cycle durations, and returns on investment. After articulating these positive points to upper management, you can work your way toward the less tangible benefits, like customer service reps having more time to spend actually serving customers. Other more conceptual benefits include freeing IT from having to figure out fixes for EDI purchase orders and creating value, in the form of analytics and KPIs, by having more insight into the business. Ultimately, you want to underscore that the end result of improved sales order processing is customer satisfaction. And who doesn’t want happier customers? Improve Sales Order Processing with Smartsheet for SalesEmpower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time. Try Smartsheet for free, today. What is the main purpose of a sales order?The sales order confirms the terms of a transaction between a buyer and seller. The seller generates the order, often in response to a purchase order. The seller may send this document to the customer or rely on it solely for internal use. The sales order details the quantity, price, delivery time frame, and more.
What is the difference between an invoice and a sales order?Sales orders are sent by suppliers to buyers after receiving a purchase order from the buyer - verifying details and the confirmation of the purchase. Invoices are sent by supplier to request a payment from a buying party once goods or services have been fully delivered by the supplier.
Why is sales order important in business?Importance of Sales Order
A sales order would provide you with information on whether your products are in stock and how many are on backorder. It lets your purchase department make educated forecasts and purchase from the distributors. Enter a sales order into the system as soon as possible.
Can I use a sales order as an invoice?While a sales order can be sent to a customer to confirm an order, it isn't a request for payment. You must send your customer an invoice to request payment.
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