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A Detailed Explanation on Sales Order, the Benefits and Best Practices

21 Oct, 2021 | Business Tips

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You must have seen a document called a sales order if you are into buying or selling goods. But have you ever wondered what it is or how it benefits your business? What is the difference between a sales order and other documents involved in the purchasing process?

This article will learn about sales orders, compare them to other sales documents, and uncover their benefits and best practices. By the end, you will be through with using sales orders and the reasons for using them.

What is a Sales Order

A sales order is a commercial document generated by a seller and issued to a customer. It specifies the sale of goods or services and details the sales’ specifics, including pricing, quantity, and quality of goods or services provided.

It also offers information about the anticipated delivery address, delivery date, payment terms, and other sales terms and logistics. 

A sales order (SO) is an internal document prepared by the vendor and kept in the file. It allows your business to track inventory and orders accurately and quickly. 

It is, in particular, helpful to manufacturers, online B2B wholesalers, retailers, and suppliers. Sales order acts as a way to confirm a sale before the product or service delivery.

Read more: How the Right Purchase Order Software can Boost your Profits?

Importance of Sales Order

Sales orders are crucial to order and inventory management systems. When a customer sends a purchase order or places an order on the eCommerce store, your business should fulfill the 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. Never err by using the purchase order as a sales order. It will result in chaos in the long run, not only with the purchasing department but also in accounting.

The billing department refers to the sales orders. It verifies related details and the authenticity of the sale and generates invoices. Businesses automate the creation of invoices by converting sales orders to invoices. Errors in quantity and pricing in the sales order always lead to accounting errors.

While reviewing the company’s financial statements, financial auditors inquire about sales order documents. Working capital loans are given based on the confirmed sales order value of the business.

Benefits of Sales Order

If you are already using documents like quotes and invoices, you may wonder how you would possibly benefit from even more paperwork. The sales order process can save you valuable resources and time. 

Below are some of the ways your business can benefit by optimizing the sales order process:

Minimizes the Risk of Human Error

As the sales orders are drawn up before assembling, shipping, or carrying out the goods or services, it gives you an excellent opportunity to check the sales for accuracy. You and the client can look at the sales order documents and check them against the purchase order and the quote.

You can consider using file-sharing software to securely share the sales documents with your clients and between the teams. 

You can easily streamline the purchase process and offer quicker and more efficient customer service with file sharing. It makes it easier to catch errors before the products are shipped.

Keeps Your Accounts in Order

Each of the sales documents is appreciated by your accountants. You can match quotes, sales orders, purchase orders, and invoices using order numbers. It can easily be done in QuickBooks or another accounting software of your choice.

While generating an invoice, your accounts receivable department can double-check to enter the correct information. You can also adjust your other charges like the cost of goods sold (COGS), inventory assets, and sales. 

It protects you in an audit and provides you with the most accurate information while making crucial business decisions.

Improve Inventory Tracking

Proper inventory management requires accurate inventory tracking. Knowing what orders must be fulfilled before shipping can help you prevent backorders and optimize the procurement process.

Having sales orders lets you allocate inventory for specific customer orders. Also, there is software that you can use to record packing and shipping details in one interface. 

Having products in stock while in need enhances your eCommerce store and improves relationships with customers. When you work in B2B commerce, the client must trust your ability to deliver products and services on time.

Read about: Are you Confusing Markups and Margins?

Best Practices for Sales Order

Format

Your sales order must contain the below information:

  • Company and customer name
  • Customer shipping address and billing information
  • Customer contact information
  • Service or product information
  • Price (Before taxes)
  • Total price (after taxes)
  • Tax, delivery, and shipping charges
  • Any deposits made by a customer
  • Current balance
  • Other relevant information
  • Terms and conditions
  • Signatures

The Process

While mapping the sales order process, you must also consider the customer journey that your clients take while purchasing products or services. 

Mapping the customer journey and considering the below-mentioned process helps you optimize the customer experience and improve the quality of service.

  • A customer sends a request for a quote (RFQ).
  • Your company generates and sends a quote to the customer.
  • The customer accepts the quote outright, or negotiations take place.
  • Once the customer agrees upon the terms, it sends back a purchase order.
  • The company creates a sales order based on the purchase order.
  • The sales order is sent to your customer for confirmation.
  • The order is assembled and prepared to be sent.
  • The goods or services are delivered to your customer.
  • An invoice is created and sent using the details in the sales order.
  • The customer pays the invoice within the agreed time frame.

Tips

Always test the software: Whatever software you may use, make sure you are doing localization testing. You must format it professionally and autofill without a doubt.

Use the same numbers across all sales documents: For instance, while using an order number on a quote, use the same number on all the documents generated during the process. It allows your sales, accounting, and shipping departments to follow these processes from beginning to end. It makes sure that no orders slip through the cracks.

Engage with the data: You can use accurate sales orders with great success in the marketing department. The sales data can be used to measure the effectiveness of other marketing channels or the success of the Display Ad Campaign.

Read about: Here’s how Sales System Software fits in Your Tech Stack

Dear Systems Sales Order Automation

Dear Systems, sales order automation streamlines workflow and reduces the processing time, right from the point of sale, verification, inventory management to delivery and long-term customer retention.

It would reduce order processing times by 50%, and you can process more orders in the same timeframe.

The right sales order processing software would take your business to places. If you want the benefits for your business too, then contact Dear Systems

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