Businesses use a great deal of documentation in order to keep companies running smoothly. Doing so generally results in greater revenue. Two of the most basic documents companies uses are sales orders and invoices. Although there are some similarities between the documents (e.g., both may list the company and purchaser addresses), there also are major differences.
Sales orders indicate that the company that is providing goods or services needs to take action (i.e., to complete the order). Usually this involves finding the product, packaging it, etc., or setting up a meeting so that services can be rendered. Invoices indicate that the purchaser of goods or services needs to take action. This typically means that the purchaser needs to compensate the company monetarily for the products or services, which can be done by sending the company a check or money order, transferring money from a bank account, or going to the company website and using an online form to pay with a credit card.
Sales orders are triggered by the purchase order of the consumer. This is because a company cannot list the items or services that an individual wants until the individual lets the company know what is desired. Invoices are triggered by the completion of a sale or service. This is because the company cannot charge an individual for products that were never delivered or for a service that never was given.
Sales orders list the products or services that the consumer wants. This can be a single item/service or it can be an extensive list of multiple products/services. These often are listed with an item/service number and a short description. Invoices list the amount of money owed for those products or services. The invoice may reiterate the product and service list to show clearly how the total owed was obtained, but the main objective is to indicate that money is due.
Sales orders indicate the date the consumer's request for a product or services was processed. This means that the date listed indicates a time in the past. Invoices indicate the date that money is due for those products or services. This means that the date listed indicates a time in the future.
Sales orders are used to approve, track, and process the completion of an order. For example, once the sales order is received by the purchaser, if there are any errors such as missing items/services, incorrect items/services, etc., then the purchaser can contact the company to revise the order and correct it. Invoices are used to communicate that the order is complete. By this time the goods/services have been delivered or rendered, so the individual cannot make changes.
Eugeniu Braila, CPA