Sale Order vs. Invoice

Sale Order vs. Invoice

Every business uses a set of key documents. It’s necessary to know the basic terminology, understand which form is for what, and distinguish between two similar papers. In this article, we will look at the invoice and sales order definition and explain in detail how they differ and in what cases they should be used.

What Is a Sales Order?

A sales order (SO) is a list of goods and services a supplier company can provide to a customer. Such a document is mainly used for internal work to confirm a purchase. As a rule, it’s compiled based on a client’s purchase order and provides a recipient with more detailed information about products and shipping details. Once the order has been placed, a sales order acknowledgment should be issued as confirmation.

As you understand, in the chain of documents connected with transactions, this form is one of the first. When compiling it, remember that the initial version may not be the final one. A customer has the right to add or remove some of the listed items. In this case, you, as a supplier, need to issue another sales order.

What does invoice mean in an order? Based on this information, in the future, upon completion of tasks, you generate an invoice and send it to the specified address. Since this document is mainly used for internal purposes and at this stage of interaction with customers doesn’t imply payment, it’s not entered into accounting books.

Definition of an Invoice

Invoices are mandatory documents for any business that provides goods and services without prepayment. The primary purpose of an invoice is to request compensation for the items delivered. It’s issued by the executing company and given to a client after the order has been completed. After that, a recipient has a certain time to transfer money to your account.

What to include in an invoice? Such a document should contain not only detailed information about all products and services rendered but also payment terms and methods, as well as fees that will follow in case of late payment. If you don’t draw up and fill out papers manually, but with the help of modern software like Saldoinvoice, you will not miss any critical information.

What is a sales invoice in accounting? If you compare it with SO, it has more weight for accounting. Since it’s directly related to financial flows, it should be carefully compiled and stored. Each invoice for an order is a written confirmation that you have fulfilled all obligations and reasonably require payment. It will help you protect yourself from unreliable clients and will be needed to pay taxes.

Difference Between Sales Order and Invoice

Is a sales order the same as an invoice? As you now understand, they are very different. Here’s a shortlist of the main differences to help you navigate the terminology:

  • Purpose. It’s the main difference between the two documents. SO contains information about the products a customer intends to purchase. An invoice lists all goods and services that have already been provided.
  • Action required. SO serves as a signal to a company it can proceed with an order. An invoice signals to a client that payment needs to be made.
  • Timing. SOs are issued before providing goods and services, and order invoicing occurs afterward.
  • Type of business. As practice shows, SO is more often used by those companies that run a product-based business. Those who specialize in providing services skip this stage.
  • Accounting. As already mentioned, SOs are rarely included in accounting records. Invoices, on the contrary, are valuable for accounting, auditing, and paying taxes.

Both of these documents have a certain importance for businesses. However, if SO creating is an optional step, and some freelancers and self-employed people neglect it, invoicing is crucial. Invoice Maker by Saldo Apps makes composing, editing, and sending the necessary papers simple and accessible even on the go.