In procurement, people talk a lot about two documents: sales orders, and purchase orders. While each of these documents involves selling or buying goods and services, it’s easy to get them confused. After all, many purchases involve both a sales order and a purchase order.
Let’s distinguish between the two.
A sales order is a document that is issued by the vendor to their client. It tells the purchaser what products were included in a particular purchase, and how much each item costs. Typically, you’ll see the following information:
- Seller name and address
- Purchaser name and address
- Delivery address, if different
- Items sold, quantity, and price included in the shipment
- Purchase order number
- Payment due date
- Contract terms.
Keep in mind that there may be more than one sales order that matches a purchase order. Likewise, you might see multiple purchase orders added to a sales order. However, the sales order will only include one shipment. In many cases, the invoice will include the items on corresponding sales orders.
Purchase orders are basically the opposite of a sales order because they are issued by the purchaser to the seller. In a purchase order, the buyer promises to buy something from a vendor for a particular price. During the purchase order process, the buyer and seller negotiate all the terms of the sale.
Sometimes a purchase order will be for a one-time purchase, such as new office equipment, or it may be for repeated supplies. In this case, the buyer will usually request the items to be delivered as needed to keep inventory levels optimal.
Purchase and sales orders work together
At the end of the day, both of these documents work together. The purchase order creates an obligation to make a purchase. The sales order responds to a particular transaction as it takes place.