Sales Orders and Estimates in Method:CRM

Fran Reed

1/3/2015

 

It seems like there is confusion about the use of Sales Orders and how they relate to Estimates. This blog hopefully shed light on the differences.

 

Often times an Estimate and a Sales Order are intermingled or their use may overlap, but there is a difference.

Sales Orders are generally used for product sales whereas Estimates are used more for custom, labor or unique product or service sales.

 

Sales Orders record that a customer has committed to buy something from you at an agreed upon price but there’s a gap in time before you can ship the goods to them. Their commitment to buy is generally expressed in a PO that they send to you. (A PO sent by you for goods and services becomes a Sales Order to your vendor).

Accounting rules generally state that you can’t record “Income” until you ship the goods or have “earned” the sale.  So a Sales Order is the placeholder to alert you that you have to do something before you can ship the goods and invoice.

The “gap” to fulfilling the order could be due to items not being in stock at the time or custom processing is needed to generate the ordered items. Distribution companies or companies which sell custom or semi custom products use Sales Orders almost exclusively. Companies using EDI will generally not accept a shipment unless there is a Sales Order authorizing the sale.

When your items are ready to ship, you can convert all or part of that Sales Order to an Invoice.

 

Both QuickBooks and Method:CRM allow you to convert a Sales Order to an Invoice for partial shipments.They will keep track of the remaining amount to ship,and close the Sales Order when all items have shipped.  In QuickBooks desktop (QBO does not support Sales Orders), these need to processed one at a time. However, with some customization in Method:CRM you can process several Sales Orders at once.  For example, if you had 500 orders for Widget A and you received these 500 from your vendor  – you can now  fill all of your  orders. You could process these one by one but with  Method:CRM you can set up a custom process to generate invoices for all of those Sales Orders that wanted Widget A.  What a time saver!

 

Recording a Sales Order in QuickBooks/Method:CRM, is a “non posting” transaction. It is a memo entry.  The items “sold” on a Sales Order will not affect your inventory or income. However, an  inventory item will show that it is “reserved” for a Sales Orders

 

Bottom line…

Sales Orders are great tools for tracking upcoming sales forecasting parts needed.

 

Additionally, A Sales Order can also be used to denote a time based agreement or rental (like equipment or musical instrument rentals).   If it’s an annual agreement, set up the Sales Order for a Qty of 12 at set Rate and then Invoice once a month for a Qty of 1. This way, the months remaining and balance due are easily shown on the Sales Order.

 

Estimates, on the other hand,  are generally used to estimate custom/complex uniquely priced work products where labor is involved as well as parts and is billed to client.  Estimates are many times called Quotes.   The description of work is usually more involved and specific to the client. You generate an estimate of  work to present to a customer. The customer can accept it or reject it.

The challenge with Estimates, is tracking their status. Has it been submitted to the customer, is it approved or closed? To assist with this, in  Method:CRM, an “Order Status” field can be added to the Estimate, so that you can always know the status of your Estimate.  This field would be a Method only field.

From the estimate, you can submit parts needed to vendors and bill the client.  Like Sales Orders, Estimates are also “non Posting” transactions.  But unlike Sales Orders, estimates do not “reserve” inventory amounts. Once the Estimate or Quote is accepted (customer sends a PO or some form of approval), then work begins and customer can be progress billed via direct invoices or a Sales Order is generated for the job.

Estimates are generally used in Construction, Landscaping and the like.


Both tools or documents are critical presale documents. And with Method:CRM you can manage these processes more efficiently and effectively.

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