Sales order vs purchase order

The two documents in one picture

Suppose a retailer in Nagpur orders paint from a distributor. The retailer writes a purchase order and sends it. The distributor accepts it and books a sales order in their own system. The retailer's PO and the distributor's sales order should match line for line.

Neither is a GST document

Orders create no tax liability and no input tax credit. GST starts with the tax invoice at the time of supply, or with a receipt voucher if an advance for services is received. That is why an order can be changed freely until goods move, while an invoice can only be corrected with a credit note or debit note.

This is general information, not tax advice.

Worked example: one order, three dispatches

The Nagpur retailer orders 300 litres of emulsion and 100 litres of primer. The distributor's sales order SO/25-26/0233 shows:

On the retailer's side, the purchase order shows the same three receipts against it. If the distributor's balance says 50 litres pending while the retailer's PO says nothing pending, someone has a wrong entry, and it is cheaper to find it now than at the year-end ledger confirmation.

Why sales orders matter for distributors

• Stock commitment: stock on hand minus stock on open sales orders is what you can actually sell today.
• Short supply: a list of pending order lines shows what to buy from the company next.
• Field orders: salespeople booking orders at shops create sales orders, and the office bills them after checking credit and stock.
• Approval: an order from a party over their credit limit can be held before it becomes an invoice. See setting credit limits for customers.

Why purchase orders matter for buyers

• They stop unauthorised buying by staff.
• They give a reference to match against the supplier's bill.
• Open POs show what stock is on the way, so you do not order twice.

A ready format is in purchase order format.

Where orders go wrong

• Rates differ between PO and invoice. The buyer's PO says ₹270 a litre; the seller's price list was revised to ₹285 last week. Decide which rate applies before dispatch, not when the payment comes short.
• Orders booked twice. A salesperson books the order in the field and the shop also phones it in. Ask for the buyer's PO number or a single order reference to catch duplicates.
• Old pending orders. A sales order pending for three months is rarely still wanted. Call the buyer and close it, or it will distort your stock and purchase planning.
• Wrong party. Similar names, such as Sharma Traders and Sharma Trading Co., get mixed up. Pick parties by GSTIN or mobile number, not by name alone.

Habits that keep orders clean

1. Write the buyer's PO number on your sales order and invoice.
2. Close short-supplied lines that will not be sent, instead of leaving them pending for months.
3. Review pending sales orders daily and pending purchase orders weekly.
4. Keep one order per buyer per day where possible; ten tiny orders from one shop make dispatch messy.

Doing this with Tally and Cashflow OS

TallyPrime supports order processing with sales order and purchase order vouchers and tracks pending quantities against them. With Cashflow OS, sales orders taken by salespeople in the field, from a showroom wishlist or a quotation, are posted to Tally through the connector, with GST worked out from the item and the party's state. Orders from frontline staff can need owner approval first. Purchase orders can be created from the phone too. See sales orders to Tally.