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Sales order invoice for Sales

in this video we'll talk about the sales order how you can use them in your business and how it is different from an invoice code and purchase order hi this is Eric I'm a CPA and accounting expert with fits small business let's get started when a customer makes an order you can simply take note of the order in a sticky note or a notebook or just remember it however that only only works if you handle a few customer orders daily but as your business grows you need to establish a solid paper trail for all orders so that you and your employees can track the progress and quality of every order by using a sales order document you can ensure the accuracy of the order and fulfill the requests of your customers take note that sales orders aren't requests for payment we only use sales orders as guiding documents in fulfilling customer orders later in this video we'll compare the sales order with other popular Source documents now to better illustrate to you how a sales order works and its purposes we need to take a closer look at the order fulfillment cycle first the sales order initiates the order process when a customer makes an order we use a blank sales order form to document the order documenting the process is very important because it establishes accountability and serves as reference in case a customer disagrees with the goods shipped after we create the sales order we send them the customer for approval once approved the sales order becomes a binding contract between us the sellers and with the customer next would be a basis for extending credit to customers sometimes our loyal customers would ask to purchase an account before we grant their request we should first forward the sales order document to the credit department for for credit evaluation our AR Personnel will first check if the customer has an outstanding balance or if the customer has a past history of late payments if our customer is a good payer we can give them a generous payment term if you want to learn more about giving payment terms and early payment discounts I'll put the links to our articles and videos in the the description box below be sure to check them out after this video our sales order is also the basis for our inventory records when we ship the goods to the customers we need to update our inventory and cost of goods sold account we use the information in the sales order to remove the quantity sold from the inventory account and then we transfer it to the cost of good so account in the income statement moreover we also need the sales order for shipping because it contains the customer's shipping address and lastly after preparing the goods for shipment we forward the sales order document and other shipping documents to accounts receivable the AR clerk will prepared the invoice that we will send to the customer we can either send the invoice along with the shipment so we should print the invoice before we we send the shipment to the customers or we send it electronically through email or by using small business accounting software such as QuickBooks Online QuickBooks Online is a wide array of features that lets you personalize and manage invoices easily if you want to learn QuickBooks online for free check out our playlist of QuickBooks Online tutorials in the description box below now that we've seen how a sales order works in the order fulfillment cycle it's time to check out a sample sales order document first and foremost the document should explicitly spell out the words sales order and it must be on top we don't want this document getting mixed with invoices quotes or perose order as much as possible make it big and in uppercase then on the right side we see the order number the order number serves as a unique identifier for all sales orders it means that every sales order has a unique number it also means that no sales orders should have the same order number as much as possible it's better if it's pre-numbered so that we can easily account for orders of course let's not forget company details why because it helps us segregate internal documents from other documents after that we need to enter the billing information and shipping information sometimes customers would ask us to ship the goods to a different location so we should be careful in the addresses because we don't want our Goods going directly to the customer's main store or headquarters when they want shipped to the warehouse then let's proceed to order details don't forget to enter the date the order was approved and when it is needed by the customer Also let's ask the customer how the goods will be shipped whether by air land or C then specify The Courier Service who will deliver the goods to the customer customer for transparency let's also include the payment term and the shipping term the AR Personnel who will prepare the invoice will need the payment term for invoicing while the people handling the shipment will need this the shipping term for the shipping address and when dealing with the Courier and finally you may include the customer number and the salesperson in charge of the order after that let's complete the sales order never miss a quantity ordered be specific as possible specify if the goods ordered are measured in grams kilogram liters pieces bundles packs boxes containers Etc in our Sample Sales order there's a field for the part number this will be useful if we are selling hardware tools or Electronics then let's fill out the description box here try to be specific as well mention the product name the manufacturer the build and the color of the product and lastly don't forget to enter the price and the total these two are pretty self-explanatory at the bottom of our sales order you need to sum up the total indicate the mode of payment and let the salesperson sign after receed buy and we're done with the sales order actually there are lots of sales order formats that you can follow so feel free to find the best format that works for you because sales orders May vary in every business now is the moment of truth what is the difference between the sales order and an invoice we've discussed already in Greater detail what a sales order is and I think that I've made it clear that it is not a request for payment instead we use the sales invoice to build customers and ask them to fulfill their end of the bargain which is to pay the contract price meaning we've done our part and we demand payment and on that note you can also check our article about accounts receivable best practices link on the description box below to learn more about how to manage your invoices and collect from customers now that we're clear with the difference between a sales order and invoice let's also discuss how a code is different from a sales order a coat is an estimate of a particular good or service for example um your buying house and the agent said that the house sells for around let's say $15 million that price is just a cut and it may not be the final selling price price now if we connect that to our topic today everything in a cotter estimate is never final along the way the customer will try to haggle the price or perhaps negotiate with you regarding the scope of the service or the goods included once both parties which is you and the customer agree to certain terms that's the time that a quot becomes a sales order order and finally let's distinguish a sales order from a purchase order while they both have the word order these two are entirely different the sales order is a document that we create when a customer makes an order in contrast to that a purchase order is a document that we make when ordering from Supply so in summary if we are the customers we use purchase orders if we are the sellers we use sales orders and that's it for today's video I hope you guys learned a thing or two about sales orders thank you for watching and be sure to check out the article that accompanies this video I'll put the link l in the description box and please don't forget to subscribe to our YouTube channel fits small business no spaces click the Subscribe button and hit the Bell icon to get notifications for new content that gives you expert answers to your small business questions till next time