You have a customer who’s ready to buy (hurray!). Before you can ink the deal and cash your commission check, you need to outline the details of product delivery and payment in a sales order. After all, the last thing you want is for the customer to buy one thing but get something else because you didn’t document the details.
If you’re unfamiliar with sales orders — or have struggled with the right way to draft one — don’t worry. We’ll go over the different types, their benefits, and how to create one that works for you and your customers.
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What is a sales order?
A sales order is a document that provides the details of an order and the terms of the transaction. It’s created by the seller after a buyer submits a purchase order. If a purchase order is not involved in the sale, the seller creates the sales order after the customer agrees to purchase a product.
An order document typically includes customer information, product details, pricing, and delivery information. Because it is not a binding contract, either party can revise the details of the order after the sale is complete.
When carefully drafted, sales orders allow companies to confirm a deal’s accuracy before shipping. After a sale is complete, they provide records of transactions for sellers.
What’s the difference between a sales order and a purchase order?
While both documents contain similar information, there are two big differences:
A sales order is an internal document for record-keeping and order fulfillment. It is created by sellers and their teams.
A purchase order is a legally binding document issued by the buyer to the seller indicating an intent to purchase. A customer creates a purchase order and sends it to the seller, who then creates a sales order based on purchase order details.
What’s the difference between a sales order and an invoice?
An invoice is a request for payment and is sent to the customer after the sales order has been processed and (typically) after the order is fulfilled. Payment terms and type of payment are typically included on invoices but not in the sales order document.
While sales orders are internal documents for sales teams only, invoices are financial documents for both the buyer and seller. Customers can use invoices for tax purposes as proof of a business expense. Sellers need to keep invoices for audits to confirm revenue and proof of tax collection.
What are the benefits of sales orders?
Order documents can provide benefits beyond the sales and fulfillment processes, including:
- Increased efficiency: When all the information for a sale is in one place, you can process orders faster. What’s more, you can more easily track orders and keep an eye on timely and accurate deliveries. Integrating sales orders into your financial process can also help with better cash management and billing.
- More accurate orders: Using separate or poorly defined procedures to process orders can lead to mistakes that frustrate customers and take time to fix. Using sales orders creates a single source of truth that leads to fewer errors, especially if you automate the process. Fulfillment teams can also use them to double-check orders before shipment.
- Better inventory visibility: The order document makes it easier to track the products needed to fulfill an upcoming order. You can use them to make sure you have enough stock for all of your upcoming orders, ensuring no delays.
- Improved customer experience: Delays and mistakes frustrate customers. When organizations create a smoother fulfillment process with order documents, customers are more likely to be satisfied.
Types of sales orders
Sales orders are not “one size fits all.” Rather, there are four different types:
- Cash: This is the simplest type. It includes the fewest details because there are no accounts receivables involved — only cash. After the customer places the order, they pay for it, and the order is shipped. Sometimes, the customer picks up the order and pays for it at that time. For example, a customer orders a mattress online, comes to the store to pay for the order, and picks up the mattress.
- Rush: When a customer needs an order much quicker than the usual fulfillment period, you can use this document. The biggest difference from the cash order is that the customer pays after the order is fulfilled. Rush orders are often fulfilled the same day they are created.
- Scheduling agreement: Like purchase orders, scheduling agreements are external documents. They include an order’s fulfillment details, such as when an order will be delivered and specific quantities for each product sold. This is often used for more complex orders.
- Third-party: Small businesses often use this when a third-party vendor handles fulfillment and shipping of their products. After creating this type of order, the vendor uses it for fulfillment.
How to use a sales order in the sales process
If you’ve never used an order in your sales process before, it’s easy to create one for your organization. Follow these best practices to get started:
- A customer asks for a quote: When the customer is ready to buy, they ask the sales representative for a quote on the products they want to purchase.
- Seller responds: The sales representative then considers the request and responds with a formal quote.
- Customer agrees and sends a purchase order: The customer delivers a document signifying that they want to buy the product.
- Create a sales order: Using a tool like Salesforce CPQ, the seller generates an order document. In many cases, this can be streamlined with templates.
Sales order template framework
Generally speaking, a sales order should include the following:
- Selling company name/address
- Purchaser contact info (name, address, phone number, email)
- Order date
- Shipping and/or delivery date
- Product information
- Price (before taxes)
- Taxes and other fees
- Terms and conditions (often drafted by the selling company’s legal team)
- Signatures of both buyer and seller
- Other relevant information
Software for order creation
Because the sales order process is critical to delivering a smooth customer experience, it’s important you get it right. Use the tools below to help automate some of the manual work involved, and to ensure all of your information is up to date:
- CRM: As the single source of truth for sellers, a CRM captures all relevant customer information so that it can be easily accessed for order creation. Top-tier CRMs even include automation and AI that automatically update deal records when new customer information is sent via email or by phone.
- Order creation and invoicing/billing software: Creating and delivering orders is not the end of the road for sellers. It’s important that products are delivered on time, according to customer expectations, and that product delivery is followed up quickly with invoices that are easy for customers to pay. Look for software that automates much of this process so your finance team doesn’t have to waste time spinning up invoices and processing payment.
Improve your efficiency with well-drafted orders
Processing sales involves different people and methods, which can get messy. By creating sales orders that contain every deal’s details, your organization can provide clearer outcomes for customers and employees. Ultimately, this will improve the experience for customers and make your selling motions more efficient.
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