Difference between a sales order and a purchase order

For some reason, there seems to be a lot of confusion on the difference between a sales order and a purchase order.  Let's see if I can help out.

Both of these types of documents represent an agreement between your company an a third party.  In the case of a purchase order, this agreement is for your company to acquire some services or goods from a vendor.  In the case of a sales order, this agreement is for your company to provide some services or goods to a customer.

As far as AX is concerned, the processes to update these documents and the inventory are pretty similar.  The product receipt, in the case of a purchase order, indicates that the material is physical available. The corollary for the sales order is the packing slip. Similarly, for financial update, the purchase order has a vendor invoice and the sales order has a customer invoice.

These documents are very similar, but their intended parties represent different sides of the supply chain.

Anyone else care to join in?   People coming into the industry might need some help.

  • And, with purchase order, for AX, it has change management feature that can be turned on, which make the Purchase order process a little more complicated. And each time a purchase order is confirmed, it's going to have a history record.

    I don't think Sales order has above features, though.
  • One thing that confuses people is that a customer will give you their PO number, which you turn into a sales order. So, when you are dealing with a customer, you have to refer to it as their purchase order vs. internally within your own company where you would call it a sales order. This is just the process of business though. Sales orders and purchase orders in AX are in different modules. I think what confuses people is the language that is used with customers and then changing it to discuss internally within their company.
  • In reply to KellyKane:

    Kelly I completely agree. It's the limitation of our language here that trips people up. Also when dealing with multi company AX deployments you could have intercompany Sales Orders and intercompany Purchase Orders. Which really can send you down the rabbit hole quickly when talking through your own PO to yourself so you can invoice a sales order after shipping to yourself.
  • Hi Jake,

    Can u explain intercompany sales and purchase order..?.How the sales order in one company affects other company...??
  • In reply to Gopinath M:

    Hey Gopinath,

    Sure! In intercompany scenarios, one legal entity in AX acts as a customer and the other acts as a vendor. This would be helpful where one legal entity produces materials and some other legal entity buys them and sells them to their customers.

    In this case, there's usually a purchase order originating in the purchasing company (lets call this company A) that's being fulfilled by the sales company (company B.) The nomenclature of the orders are based on perspective - if you're looking from company A, the purchase order is referred to as the "purchase order" and the sales order in company B is referred to as the "intercompany sales order" (ICSO). Vice versa, if you're looking from company B, the sales order is called the "sales order" and the purchase order in company A is referred to as the "intercompany purchase order" (ICPO.)

    Does that help?
  • In reply to Jake Roder:

    Hi Jake,
    Thanks for ur reply..It was very useful..