Purchase Order vs. Sales Order: What’s the Difference?

January 5^th, 2021

When companies exchange data electronically, the terms purchase order (PO) and sales order (SO) often come up in the ordering process. In principle, they are the same because the information contained within the document is identical. Furthermore, when an EDI standard is used both records are designated with the same abbreviation: ORDERS. So what’s the difference?

The use of purchase order vs. sales order is determined by the view of the market participant. While purchase order refers to an outgoing order for the purchase of goods or services, the term sales order is used in the instance that the order is received on the sales side (incoming).

Sales order (SO) is therefore used to denote orders received by the supplier from the customer. Additionally, when the entire sales process is viewed from the supplier's perspective, it’s known as the order-to-cash process: incoming sales orders subsequently lead to a (hopefully healthy) cashflow.

From the buyer (customer) perspective, the same document is referred to as a purchase order (PO). That’s because the customer is placing an order to purchase something from a supplier. The buyer must then pay for the PO, leading this process to be known as the purchase-to-pay process, which is more commonly referred to as procure-to-pay in the U.S.

Businesses that exchange documents with their partners as TIE Kinetix customers via our SaaS platform, FLOW, can do this both on the purchasing side and on the sales side. With FLOW, we support both processes—order-to-cash and procure-to-pay. Companies on their way to 100% digitalization for document exchange—and supply chain automation in general—should therefore always keep both sides in mind.