If you’re running a business with many moving parts, two documents that can help you keep track of business activity are the purchase order and the sales order. But what’s the difference between the two?
A purchase order (PO) is a commercial document that is created by a buyer and presented to a vendor, listing the goods and services they want to buy, as well as the price, quantity, delivery date, and any special terms or conditions. Once both parties have signed the PO, it becomes a binding contract.
The PO serves as an authorization for the vendor to ship the goods who generates an invoice, which the buyer will use to make payment.
The purchase order is an important tool for buyers and sellers alike.
- For buyers, it protects them from being charged more than they agreed to pay. It also ensures that they will receive the goods or services ordered.
- For sellers, the purchase order secures payment for their goods or services and helps them to manage their inventory. When information about the quantity of goods sold is entered into accounting software, it can help businesses to keep track of inventory.
A sales order (SO), on the other hand, is a document created by the vendor and sent to a buyer, confirming the sale of goods or services. A sales order typically includes all of the information needed to process a sale, such as quantity of goods ordered, price per unity, invoice numbers, payment information, and packing slip details.
Sales orders are important for a few reasons.
- First, once the order is accepted by both parties, they act as a binding contract.
- Second, sales orders help to keep track of inventory levels.
- Finally, sales orders can help businesses to stay organized and efficient.
Understanding the difference between these two types of orders is essential for smooth and accurate transactions.