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Sales order benefits and best practices - Cin7

Written by Kenny Freeman | Jun 20, 2022 6:00:00 AM

If there's one workflow that touches almost every part of your business, it's the sales order process. Get it right, and you'll see faster cash flow, fewer headaches, and happier customers. Get it wrong, and you're looking at data errors, unfulfilled orders, and money left on the table. The good news? Optimizing your sales order process doesn't have to be complicated.

Key Takeaways

  • Definition: A sales order is a seller-generated document that confirms a customer's purchase order (PO) and approves the sale.
  • Efficiency: Automation can process orders up to 75% faster than manual entry, directly boosting cash flow.
  • Accuracy: Digital systems like EDI and OCR reduce human error in pricing, quantity, and inventory tracking.
  • Scalability: Cloud-based order management systems (OMS) allow for real-time inventory visibility across multiple sales channels.

So, what exactly is a sales order? How does it benefit your business? And what steps are needed to optimize the process?

Sit tight! We’re going to take you through the entire process including:

  • What a sales order is and the sales order process.
  • Why you should automate sales orders.
  • What the benefits of sales order automation are for businesses.
  • What the best practices are to optimize sales order processing.
  • How Cin7 can help your business optimize your sales order process.

What Is a Sales Order?

A sales order is a document you (the seller) create to confirm and process a customer's order for a specific product or service. Think of it as your internal playbook for that transaction; it takes the details from the buyer's purchase order (PO) and formats them so your team can handle credit approval, initiate picking from stock, or kick off a work order.

Feature Purchase Order (PO) Sales Order (SO)
Generated By Buyer Seller
Purpose Requests materials/services Confirms and approves the sale
Legal Role Creates the contract Fulfills the contract

The entire process is generally completed in three basic steps:

  1. The buyer generates a purchase order and delivers it to the seller requesting a certain quantity of materials at a certain price. Other items on the PO can include delivery schedule, delivery address, and purchase terms.
  2. Considering the purchase order, the seller issues a sales order for the buyer. The sales order approves the sale, sets payment details, and confirms the items on the PO that are included in the sale.
  3. Once the seller processes the order, the seller generates an invoice from the sales order for final payment from the buyer.

Common fulfillment types tied to sales orders include:

  • Build-to-stock — Products manufactured and warehoused in anticipation of demand.
  • Build-to-order — Production starts only after a customer order comes in.
  • Configure-to-order — Products assembled to meet unique customer requirements.
  • Engineer-to-order — Product design happens after the order is received.
  • Digital fulfillment — Digital products made on demand and delivered instantly.

Understanding which fulfillment type applies to your products helps you set up your sales order process to match your actual workflow.

What Should Be Included in a Sales Order?

  • Customer and vendor contact information
  • A unique sales order number
  • An itemized list of goods or services
  • Unit price and quantity for each item
  • Total order price
  • Tax information
  • Shipping details (address, method, estimated delivery date)
  • Payment terms and conditions

Having all of this in one document keeps everyone, from your warehouse team to your accounting department, on the same page.

For those businesses that generate a handful of sales orders every few months, the process can be done quite simply using a manual system. However, businesses with a high sales volume cannot successfully generate manual sales orders without risk of errors.

Using manual entry for every sales order increases your risk of human error. Mistakes in quantity and pricing on the sales order lead to accounting errors. Using an automated sales order process dramatically lowers the risk of human error and accounting mishaps.

A sales order is also a critical document used for inventory management. It maintains a record of orders and provides information on inventory status. Using sales orders also allows you to track products in stock and on backorder.

The Evolution of Sales Order Automation

In the not-so-distant past, managing orders meant mountains of paperwork and a lot of back-and-forth between departments. Without automated order management software, your sales team, warehouse staff, and accounting folks all had to coordinate manually, tracking inventory, maintaining shipping details, and generating purchase and sales orders by hand. It worked, but it wasn't pretty.

Using emerging technologies and innovation, traditional sales order processing has quickly adopted digital solutions. Consumer-oriented sellers like online retailers are aggressively embracing new techniques to extract specifications directly from purchase orders, eliminating manual input.

Today, sales orders can come in through a variety of channels: email, phone, your e-commerce website, mobile apps, or even automatically via Electronic data interchange (EDI) connections. EDI systems are particularly powerful because they can extract order information from documents and convert it into electronic data quickly and accurately. If something looks off, the system flags it for review. No more squinting at handwritten fax orders!

It's worth noting that CRM tools, while great for managing customer relationships and sales history, weren't designed to handle the full sales order workflow. They can help you track contacts and past interactions, but when it comes to actually creating and processing sales orders, you'll need a dedicated inventory or order management system.

Benefits of Sales Order Automation for Businesses

Using an automated sales order system makes it simple to manage and update orders using a single platform. Moreover, implementing digital solutions increases the capability to respond to orders from all channels. In contrast to traditional sales order processing, automation can offer a wide array of benefits:

#1 Process Orders Faster

  • Speed: Automation is up to 75% faster than manual processing.
  • Efficiency: Eliminates manual data entry and coordination.
  • Customer Experience: Faster picking and shipping leads to higher satisfaction.
  • Cost Savings: Reduces overhead associated with manual order management.

#2 Maximize Productivity and Profitability

With inventory and order management software, you can automate the entire sales order process. That means instantly creating sales orders, shipping orders, and invoices which speeds up your order-to-cash cycle significantly.

Another benefit of using automated sales order software is that it automatically counts and tracks your inventory. Additionally, you can set automatic notifications to alert you when your inventory levels are low.

In a nutshell, the faster you process and ship orders, the faster you get paid. Automation is one of the keys to a healthy cash flow.

#3 Improve Accuracy and Reduce Errors

Automation can minimize or eliminate human interference in sales order processing resulting in improved accuracy. Moreover, some sales order processing systems can automatically extract information from purchase orders and generate sales orders without any manual involvement.

These smart systems are integrated with such features that use keyword detection to prioritize urgent or important orders, ultimately resulting in greater customer satisfaction and fewer returns.

#4 Streamline Workflow Using Cloud-Based Solutions

Whether you're selling through a single channel or juggling multiple platforms, cloud-based inventory and order management software can streamline your workflow. Everyone on your team, regardless of location, gets real-time access to inventory levels and sales orders from a single dashboard. Plus, with your data stored in the cloud, you don't have to worry about losing critical information to a crashed hard drive or misplaced spreadsheet.

Undoubtedly, implementing an easy-to-use software solution to automate your sales order process is a brilliant way to boost productivity and cash flow.

Best Practices to Optimize Sales Order Processing

There are definitive ways to improve your sales order process. To make the optimization process simpler and easier, many businesses opt to outsource to a company specialized in customizing sales order automation. However, if you are considering the process in-house, here are the best practices that you need to know:

#1 Invest in an Order Management System

As your business grows, so does the complexity of your workflow. More locations, more channels, more moving parts. That's exactly where an order management system earns its keep. It minimizes manual inventory and order processing tasks so you can scale without the chaos.

Switching to order management systems means having a single unified platform to manage inventory. It automates the entire order-to-cash cycle. A cloud-based system is accessible anytime from anywhere.

Making the investment to secure an order management system can ensure better profits in the long run as it requires fewer involvement of internal resources. Automating the process with an order management system will facilitate better communication between teams, improve workflow, and enhance the customer experience.

#2 Automate the Entire Sales Order Process

Manual processing is vulnerable to human errors that can quickly turn the sales order process into an expensive blunder. Automation eliminates human error and repetitive tasks.

Automation is able to:

  • Generate the sales order when inventory is confirmed.
  • Show a flag or other warning when inventory level is low.
  • Send purchase orders to suppliers for restocking.
  • Send picking requests to appropriate warehouse managers.
  • Generate customer sales orders.
  • Schedule pickups and estimate shipping costs.
  • Communicate with customers to keep them in a loop.

To manage these processes, you will need to know more about inventory management software and order management systems. With the implementation of these two systems, you can handle the sales process, control inventory, and manage supplier requests from a single platform.

#3 Review Your Existing Process

Before you can optimize, you need to know what's actually happening. Start by mapping out your current sales order workflow using a flowchart. Get into the details, how long does each step take? Where do bottlenecks pop up? Where are the handoffs between teams? This kind of audit makes it much easier to spot the gaps and inefficiencies that are slowing you down.

These are just a few of the best strategies you can use to streamline your sales order process.

Cin7 Can Help You Optimize Your Sales Order Process

Automating your sales order process means less manual work, faster processing times, and fewer errors from the moment a sale is initiated through delivery. And here's the thing, your business isn't one-size-fits-all, so your tools shouldn't be either. We built Cin7 to give you the flexibility to design workflows that match how your business actually operates, and to scale right alongside you as things grow.

Our cloud-based sales order management software lets you manage your entire sales process from anywhere, at any time. Your team stays connected, workflows run automatically, and everyone has the information they need to move fast. It's inventory management, simplified.

Want to see it in action? We'd love to show you how Cin7 can streamline your sales order process. Book a free demo today!

Frequently asked questions

What's the difference between a sales order and a purchase order?

A purchase order (PO) comes from the buyer — it's their formal request for goods or services. A sales order (SO) comes from the seller — it's their confirmation that they've received the PO and are ready to fulfill it. Think of it this way: the PO says "we'd like to buy this," and the SO says "great, here's what we're sending you." They're two sides of the same transaction, just from different perspectives.

What's the difference between a sales order and an invoice?

A sales order confirms that a sale is happening — it's created before the goods ship. An invoice is the payment request — it comes after delivery. Here's the simple version: the sales order kicks off fulfillment, and the invoice closes it out. One says "we're on it," the other says "now pay up!" Both are essential parts of a smooth order-to-cash cycle.

Who issues a sales order?

The seller issues a sales order. Once a buyer sends a purchase order, the seller creates a sales order to confirm the transaction details — items, quantities, pricing, and delivery terms. It's primarily an internal document. The seller uses it to manage and track order fulfillment from their side, making sure everything gets picked, packed, and shipped correctly.

What should be included in a sales order?

A solid sales order covers all the key details so there's no confusion on either side. Typical inclusions: seller and buyer contact information, sales order number, itemized list of goods or services, quantity and unit price, total order price, tax information, shipping address and delivery method, estimated delivery date, and payment terms. The more complete your sales order, the fewer back-and-forth emails you'll deal with later!

What does a sales order mean?

A sales order is a seller-generated document that confirms a customer's purchase request and approves the sale. It includes product details, quantities, pricing, shipping information, and payment terms to guide fulfillment from warehouse picking through final delivery.