For any company that deals with the sale of goods, efficient sales order management is critical to their overall success. Companies need to streamline the entire order-to-cash process, right from the moment the order is received to the moment it is shipped and delivered.
The most efficient way to do this is to incorporate a holistic order management system that can provide greater visibility to stakeholders, automate key areas and bring down overall operational costs. This will result in greater profitability for your company and a more positive experience for your end-customer.
To understand how an order management system can benefit companies, we need to first take a step back and understand what the sales order processing typically looks like and what the sales order definition is.
Here’s a breakdown of what you’ll learn below:
- Sales Order Definition
- Difference between Sales Order and Invoice
- Steps in Sales Order Process
- Strategies to improve the sales order process
Sales Order Definition
When a customer places an order for a specific product or a service, they generate a purchase order, which is sent to the seller. This purchase order includes the name of the product or service being purchased, its price and quantity.
The purchase order also includes details of the customer such as their address and payment mode. Once the seller receives the purchase order, they will generate a sales order.
Difference Between Sales Order and Invoice
A sales order is a confirmation that the supplier is capable of supplying the goods or services ordered in a purchase order by the buying party. It indicates that the seller has reviewed the purchase order and is confirming that the order will be fulfilled, whereas an invoice, on the other hand, is a bill that is raised by the supplier in order to receive payment for the goods or services.
Another main difference between a sales order and invoice is that a sales order indicates confirmation of an order, while the invoice raises the payment for the order
Difference Between Sales Order and Purchase Order
The main difference between a sales order and a purchase order is that while the seller generates the sales order, the customer generates the purchase order. Both these documents usually include similar information.
Steps in the Sales Order Entry Process
The entire sales order entry process involves various departments, right from sales and customer support, to warehouses and logistics partners.
The exact steps and technologies used in sales and purchase order processing can vary, but in general, the sales order entry process follows certain common steps.
Step 1: A customer places an order for a product. This order can be placed online, in person, or through the phone. The document generated is known as a purchase order.
Step 2: Details of the order and the customer are stored on the database. The customer order is then sent to the warehouse where warehouse managers check if the required products are in stock. A sales order is raised when the company can confirm that they are able to fulfill the order amount with the inventory.
Step 3: If inventory of that particular stock is low or is unavailable, an order is placed to the supplier.
Step 4: The purchase order is passed on to the accounts team who tags it under accounts receivable or cash sale. An invoice of sale is raised based on the quantity of the order and sent to the customer.
Step 5: A logistics partner will transport the product to the delivery destination and a delivery partner will make the final delivery to the customer’s address.
Since there are so many parts to successful sales and purchase order processing, there is plenty of room for human error, inaccurate invoices, inefficient inventory management, and more.
The best way to make your sales order entry process more effective is to integrate it into a single dashboard and automate some of the key steps.
“The more touchpoints and stakeholders involved in the order management system the higher the probability of human error”
Strategies to improve the sales order process
There are a number of impactful ways in which you can make your sales order entry process more efficient. If you’re outsourcing your sales order process, you can reap the benefits of companies who are expert in sales order automation. But if you do it in-house, then you should know these strategies that may improve your sales order process.
1. Use an order management system
An order management system is a single unified platform that helps manage inventory, automate the order-to-cash cycle and facilitate better communication between teams. The platform automatically stores orders received, keeps a track of inventory levels and raises the required sales orders and a corresponding invoice of sale. Investing in an order management system can offer you greater ROI in the long run because you will need fewer internal resources to manage your orders and inventory.
Since customer data is stored on secure cloud servers, an OMS can also prevent data breaches.
2. Automate the entire process
A manual sales order entry process is vulnerable to errors like inaccurate amounts being entered, incorrect inventory ordered and delays in sales orders and invoices being raised. This can affect your delivery times, which often leads to a negative customer experience. An order management system can automate several key parts of this process. It can automatically check the available inventory for a certain purchase order, generate a sales order and an invoice of sale and finally store customer details in a single database.
3. Invest in training your employees
An order management system is effective only if your employees are on board with using it.
Any change in internal processes will require a period of training and familiarization. If your employees aren’t comfortable with using the new software, they might revert to older processes or use the software incorrectly. This could result in gaps and delays in the sales order entry process.
To prevent this, it is essential that you provide your employees with complete training on how to best use the software and the advantages of doing so. It is equally important that you choose an order management software that caters to the unique needs of your organization. Only when employees find real benefit from using the sales and purchase order processing software will they adapt to it.
Automated digital solutions are indispensable for companies dealing with a huge volume of orders. Customers are expecting faster delivery times and in today’s highly-competitive markets, companies cannot afford to fall short. Adopting an automated order management system is vital to improve efficiency, profitability and customer satisfaction.