Sales order vs. purchase order: What's the difference?

Purchase orders and sales orders help you manage business transactions smoothly. These documents create clear terms between you and your business partners, building accountability and preventing misunderstandings. While similar, they have different functions.

This guide will explain each document type, compare their uses, show how they work together, and discuss the benefits of using technology to improve your document management.

What is a purchase order (PO)?

A purchase order (PO) is a document you send to a supplier when you want to buy goods or services. It specifies what you need, the price, quantity, and delivery terms. Once the supplier accepts it, the PO becomes legally binding.

POs help you manage procurement by:

• Setting clear expectations before any exchange happens
• Controlling your spending through approval processes
• Creating records for financial tracking
• Providing legal protection for both you and your supplier

As a buyer, POs document exactly what you ordered and at what price. For your suppliers, they provide assurance that you'll pay after delivery.

What is included in a purchase order?

A purchase order contains specific elements that help both buyers and sellers maintain clear records.

A typical purchase order includes:

• Your company information (name, billing address, contact details)
• Supplier details
• Unique PO number and issue date
• Item descriptions, quantities, and unit prices
• Delivery location and timeline
• Payment terms
• Authorized signatures
• Special shipping or handling instructions (if needed)

With all these elements properly documented in your purchase order, you'll establish clear expectations and reduce potential issues throughout the procurement process.

What is a sales order (SO)?

A sales order (SO) is what you create after receiving a purchase order from a customer. It confirms your commitment to provide the requested goods or services and serves as your internal record to start the fulfillment process.

Sales orders help you manage sales by:

• Allocating your available stock to specific customers
• Prioritizing orders based on delivery dates
• Tracking fulfillment status
• Gathering data for demand forecasting and production planning

How to use a sales order

Implementing sales orders effectively streamlines your selling process and enhances customer satisfaction. Properly creating, processing, and managing sales orders throughout their lifecycle ensures clear communication, accurate fulfillment, and strong business relationships while minimizing errors and disputes between buyers and sellers.

The sales order process typically follows these steps:

1. Order entry: Record customer information and requested items
2. Verification: Confirm pricing, availability, and customer credit status
3. Inventory allocation: Reserve stock for the order
4. Fulfillment: Pick, pack, and prepare items for shipping. Generate packing slips and shipping labels.
5. Shipping: Send out the order and update its status in your system

By creating clear sales orders, you'll maintain accurate records and build effective customer relationships.

Purchase order vs. sales order: Key differences and similarities

Purchase orders and sales orders represent two sides of the same transaction. You create a PO as a buyer to make a formal request. Your supplier creates an SO to confirm and commit to fulfilling that request. Together, they connect the key steps in the order process.

Key differences between a purchase order and sales order are:

• Origin: You create POs as a buyer. Your suppliers create SOs as sellers.
• Purpose: Your POs control spending and provide legal protection. Your suppliers' SOs guide their fulfillment operations and inventory management.
• Usage: You send POs to suppliers. Your suppliers use SOs mainly as internal documents.

Similarities between a sales order and purchase order include:

• Both documents record the agreed transaction terms
• Both include product details, quantities, pricing, and delivery expectations
• Both serve as reference points throughout the order process and help resolve disputes

Examining each document's purpose—purchase orders track what your company buys from vendors, while sales orders record what customers buy from you—will clarify when to use each one. Both documents play complementary roles in successful transactions, connecting buyers and sellers through well-defined processes.

Examples of using purchase orders and sales orders

Purchase orders and sales orders work similarly in everyday business situations. These standard procurement documents help keep transactions organized efficiently.

Let's look at a few key procurement documents and how they improve transaction accuracy and workflow efficiency:

Goods purchase example

Say you manage procurement for a regional grocery chain and need to restock your produce department with seasonal fruits. You create a PO for 200 cases of apples, 150 cases of oranges, and 100 cases of berries. Your PO includes delivery dates, contract pricing, and quality requirements.

Here's how the process works:

1. You send the PO through your electronic procurement system
2. Your supplier receives the PO and creates a corresponding SO
3. Their SO triggers inventory checks across their distribution centers
4. They assign the order to their nearest facility with enough stock
5. Their warehouse staff uses pick lists to assemble your order as specified

Service acquisition example

Say you run a mid-sized marketing agency and need video production services for a client campaign. Your steps might be:

1. Your project manager creates an internal service request with requirements, timeline, and budget
2. Once approved, your procurement team issues a formal PO to the video production company. The PO specifies deliverables (one 60-second commercial, three 15-second social clips), quality standards, revision allowances, and payment milestones.
3. The video production company's account manager creates an SO in their project management system. This SO assigns crew members, schedules equipment, and sets internal deadlines.
4. Their SO includes production specs and triggers a production schedule with key milestones

Approval is especially important for services, as you'll likely require more sign-offs for intangible deliverables. Automated approval workflows can also expedite the process.

Streamlining PO and SO management with technology

Manual document handling creates several challenges for your business. Paper-based POs can get lost, causing missed deliveries and frustrated suppliers. Handwritten SOs may lead to picking errors and shipping delays. Also, approval bottlenecks form when your managers are unavailable, and reconciling documents at month-end becomes difficult with mismatched records.

Modern order management and procurement software solves these problems by offering several key features:

Centralized document management

Store all purchase and sales orders in one secure location for easy access. A centralized system eliminates scattered files and provides immediate visibility to authorized team members.

This streamlined approach reduces time spent searching for documents and ensures everyone works with the most current versions, enhancing overall efficiency and reducing errors from outdated information.

Automated workflow notifications

Keep all stakeholders informed with automatic alerts throughout the order process. When orders are created, approved, or fulfilled, the system notifies relevant personnel without manual intervention.

Automation ensures timely responses to pending approvals and updates, reducing bottlenecks and helping teams stay coordinated during each transaction phase.

Accounting system integration

Connect your ordering process directly with your financial systems for seamless data flow. When orders are processed, financial records update automatically, eliminating duplicate data entry and reducing reconciliation errors.

Integration provides real-time financial visibility and ensures your accounting records accurately reflect all transaction activities, simplifying month-end closing procedures.

Enterprise resource planning connectivity

Link your order management with broader business systems for comprehensive visibility. When orders interact with ERP systems, departments from inventory to production gain immediate access to relevant information.

This kind of connectivity allows teams to anticipate needs, allocate resources appropriately, and maintain alignment across operations from initial order to final delivery.

Automated budget and approval controls

Implement system safeguards that verify financial parameters and route documents appropriately. Automated controls check available budgets before approvals, direct documents to authorized approvers based on predefined rules, and communicate with suppliers once orders are finalized.

These automated guardrails prevent overspending and ensure compliance with internal purchasing policies.

Complete audit documentation

Maintain detailed records of all activities and changes throughout the order lifecycle. A comprehensive audit trail captures who created, modified, or approved each document and when these actions occurred.

Thorough documentation proves invaluable during internal reviews, external audits, or when investigating discrepancies, providing accountability and transparency for all transactions.

Benefits of technology-driven document management

Switching to digital management for purchase and sales orders brings significant advantages that improve efficiency while reducing common document-handling frustrations.

• Enhanced accuracy: Digital document management minimizes manual entry requirements, resulting in fewer typos, calculation mistakes, and mismatched data across systems. Your staff can focus on analyzing information rather than inputting it repeatedly.
• Accelerated approval workflows: Digital signatures and mobile approvals mean managers can authorize documents from anywhere, eliminating paper-based delays.
• Collaborative information sharing: Digital platforms give your team members simultaneous access to the same information. Sales can see inventory levels while purchasing views of incoming orders. Updates appear in real time for all users.
• Data-driven performance insights: Track key metrics like processing speed, order completion rates, and supplier performance at a glance. These insights help you identify improvement opportunities and make informed decisions.

Implementing digital solutions for your purchase and sales order processes yields immediate efficiency gains. Your team will appreciate the smoother workflows, while management will value the increased accuracy and visibility across operations.

Simplify your purchasing processes with Ramp

Purchase orders serve as a vital tool in effective financial management and procurement practices. They establish clear expectations and create binding agreements that help companies maintain spending oversight while building strong vendor partnerships.

From routine acquisitions to intricate, extended contracts, an organized purchase order framework supports operational excellence. This is why we made Ramp Procurement.

Ramp simplifies each phase of the procure-to-pay workflow, automating repetitive tasks and bringing together procurement, bill payment, and vendor management in one efficient system. With clear visibility into your business expenses, you can make quicker, better-informed decisions while reducing unnecessary processes.

With Ramp Procurement, you can:

• Intake in an instant: Drop a contract into Ramp’s procurement software—its AI will parse the details and automatically complete the request
• Centralize communication: Route approvals, consolidate requests, and share documents in one place to ensure transparency and accountability
• Know your committed spend: Automatically generate purchase orders for clear visibility into upcoming invoices, while flagging discrepancies in units, prices, or totals
• Support risk mitigation: Protect against fraud and errors with automated three-way matching
• Get the best deals: Benchmark quotes against thousands of real, anonymized transactions to negotiate with confidence and secure the best price
• Integrate seamlessly: Connect Ramp with your ERP and finance systems to unify supplier data and eliminate manual work

Procure smarter. Partner better. Ramp makes it happen.

Get started with Ramp Procurement.