Order (business)
Encyclopedia
In business
or commerce
, an order is a stated intention, either spoken or written, to engage in a commercial transaction for specific products or services. From a buyer's point of view it expresses the intention to buy and is called a purchase order
. From a seller's point of view it expresses the intention to sell and is referred to as a sales order
. When the purchase order of the buyer and the sales order of the seller agree, the orders become a contract
between the buyer and seller.
Within an organization, the term order may be used to refer to a work order
for manufacturing, a preventive maintenance
order, or an order to make repairs to a facility.
In many businesses, orders are used to collect and report cost
s and revenue
s according to well-defined purposes. Then it is possible to show for what purposes costs have been incurred.
s and filling station
s conduct business with their customers by accepting orders that are spoken or implied by the buyer's actions. Taking a shopping cart of merchandise to a check-out counter is an implied intent to buy the merchandise. Placing a take-out
or eat-in order at a restaurant is a spoken purchase order. Putting gasoline in one's tank at a filling station is an implied order. The seller usually expects immediate payment by cash, check or credit card for these purchases, and the seller provides the buyer with a receipt for the payment. In legal terms, this form of business order is an "implied in fact contract
".
There are five basic requirements for a contract to exist between two parties: agreement, voluntary, consideration, capacity, and legality. A sixth requirement of "in writing" sometimes applies.
The main concern for commercial orders is that there must be agreement (offer and acceptance) for the order to be a contract. Prior to this, businesses often record the details of negotiations by using a request for quotation
, request for bid, sales quotation, or sales bid. Quotations are non-binding and part of the negotiation process. A request for bid can be binding or non-binding, depending on the terms of the bid.
Once an agreement or contract is in place, businesses record these as confirmed purchase orders and confirmed sales orders.
covers commercial contracts, and section 2-103 gives definitions of terms under this code. Section 2-106 describes the difference between a present sale (recorded as a sales order) and a sale (recorded as a transfer of title to the buyer).
In their "Preliminary Report on Manufacturers' Shipments, Inventories and Orders", the US Census Bureau publishes statistics for "new orders", shipments, "unfilled orders" and inventories for manufactured durable goods. This gives an indication whether trade is increasing or decreasing for manufactured durable goods in the US.
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
or commerce
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
, an order is a stated intention, either spoken or written, to engage in a commercial transaction for specific products or services. From a buyer's point of view it expresses the intention to buy and is called a purchase order
Purchase order
A purchase order is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a purchase order to a supplier constitutes a legal offer to buy products or services...
. From a seller's point of view it expresses the intention to sell and is referred to as a sales order
Sales Order
The sales order, sometimes abbreviated as SO, is an order issued by a business to a customer. A sales order may be for products and/or services. Given the wide variety of businesses, this means that the orders can be fulfilled in several ways...
. When the purchase order of the buyer and the sales order of the seller agree, the orders become a contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
between the buyer and seller.
Within an organization, the term order may be used to refer to a work order
Work order
A work order or job order is an order received by an organization from a customer or client, or an order created internally within the organization...
for manufacturing, a preventive maintenance
Preventive maintenance
Preventive maintenance has the following meanings:#The care and servicing by personnel for the purpose of maintaining equipment and facilities in satisfactory operating condition by providing for systematic inspection, detection, and correction of incipient failures either before they occur or...
order, or an order to make repairs to a facility.
In many businesses, orders are used to collect and report cost
Cost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...
s and revenue
Revenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
s according to well-defined purposes. Then it is possible to show for what purposes costs have been incurred.
Spoken orders
Businesses such as retail stores, restaurantRestaurant
A restaurant is an establishment which prepares and serves food and drink to customers in return for money. Meals are generally served and eaten on premises, but many restaurants also offer take-out and food delivery services...
s and filling station
Filling station
A filling station, also known as a fueling station, garage, gasbar , gas station , petrol bunk , petrol pump , petrol garage, petrol kiosk , petrol station "'servo"' in Australia or service station, is a facility which sells fuel and lubricants...
s conduct business with their customers by accepting orders that are spoken or implied by the buyer's actions. Taking a shopping cart of merchandise to a check-out counter is an implied intent to buy the merchandise. Placing a take-out
Take-out
Take-out or takeout , carry-out , take-away , parcel , or tapau , is food purchased at a...
or eat-in order at a restaurant is a spoken purchase order. Putting gasoline in one's tank at a filling station is an implied order. The seller usually expects immediate payment by cash, check or credit card for these purchases, and the seller provides the buyer with a receipt for the payment. In legal terms, this form of business order is an "implied in fact contract
Implied in fact contract
An implied-in-fact contract is a contract agreed by non-verbal conduct, rather than by explicit words. As defined by the United States Supreme Court, it is "an agreement 'implied in fact'" as "founded upon a meeting of minds, which, although not embodied in an express contract, is inferred, as a...
".
Steps in commercial orders
In commerce, various business documents are used to record the negotiation of an agreement to buy and sell, record the agreement itself, and record compliance with the agreement and closure of the contract. An agreement to buy and sell is a form of contract.There are five basic requirements for a contract to exist between two parties: agreement, voluntary, consideration, capacity, and legality. A sixth requirement of "in writing" sometimes applies.
The main concern for commercial orders is that there must be agreement (offer and acceptance) for the order to be a contract. Prior to this, businesses often record the details of negotiations by using a request for quotation
Request for Quotation
A request for quotation is a standard business process whose purpose is to invite suppliers into a bidding process to bid on specific products or services. RFQ, generally means the same thing as IFB ....
, request for bid, sales quotation, or sales bid. Quotations are non-binding and part of the negotiation process. A request for bid can be binding or non-binding, depending on the terms of the bid.
Once an agreement or contract is in place, businesses record these as confirmed purchase orders and confirmed sales orders.
| Commerce | Buyer's Action | Seller's Action |
|---|---|---|
| Buyer wanting the product and seller selling the product | Search for vendors (sellers) of the product | Marketing and advertising |
| Check product pricing, availability, specifications, delivery costs | Request for Quotation or Request for Bid | Sales quote Sales quote A sales quote allows a prospective buyer to see what costs would be involved for the work they would like to have done. Many businesses provide services that cannot have an upfront price, as the costs involved can vary. This can be due to the materials that would be used , and the manpower that... or bid created |
| Buyer and seller agree to transaction | Purchase order Purchase order A purchase order is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a purchase order to a supplier constitutes a legal offer to buy products or services... recorded |
Sales order Sales Order The sales order, sometimes abbreviated as SO, is an order issued by a business to a customer. A sales order may be for products and/or services. Given the wide variety of businesses, this means that the orders can be fulfilled in several ways... recorded |
| Product is shipped from seller to buyer | Packing slip Packing slip A shipping list, packing list, waybill, packing slip , is a shipping document that accompanies delivery packages, usually inside an attached shipping pouch or inside the package itself... , pro forma invoice for certain international shipments |
|
| Buyer receives product from seller | Packing slip and product is checked with purchase order; product is checked for good condition | |
| Seller sends invoice Invoice An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms... to buyer |
Match packing slip with purchase order and invoice; record purchase in financial accounts under accounts payable Accounts payable Accounts payable is a file or account sub-ledger that records amounts that a person or company owes to suppliers, but has not paid yet , sometimes referred as trade payables. When an invoice is received, it is added to the file, and then removed when it is paid... |
Record sales order in financial accounts under accounts receivable Accounts receivable Accounts receivable also known as Debtors, is money owed to a business by its clients and shown on its Balance Sheet as an asset... |
| Buyer pays seller | Pay by cash, check or electronic payment; record payment on purchase order | Receive cash, check or electronic payment; record payment on sales order |
Uniform Commercial Code
In the US, Article 2 of the Uniform Commercial CodeUniform Commercial Code
The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
covers commercial contracts, and section 2-103 gives definitions of terms under this code. Section 2-106 describes the difference between a present sale (recorded as a sales order) and a sale (recorded as a transfer of title to the buyer).
(1) In this Article unless the context otherwise requires "contractContractA contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
" and "agreement" are limited to those relating to the present or future sale of goods. "Contract for sale" includes both a present sale of goods and a contract to sell goods at a future time. A "sale" consists in the passing of title from the seller to the buyer for a price (Section 2-401). A "present sale" means a sale which is accomplished by the making of the contract.
Aggregate level of orders
In their "Advance Monthly Sales for Retail Trade and Food Services", the US Census Bureau publishes estimates of US retail and food services sales. These "sales" are orders that have been filled; payment has been made or is an account receivable.In their "Preliminary Report on Manufacturers' Shipments, Inventories and Orders", the US Census Bureau publishes statistics for "new orders", shipments, "unfilled orders" and inventories for manufactured durable goods. This gives an indication whether trade is increasing or decreasing for manufactured durable goods in the US.
See also
- Backorder
- Bill of saleBill of saleA bill of sale is a legal document made by a 'seller' to a purchaser, reporting that on a specific date, at a specific locality, and for a particular sum of money or other "value received", the seller sold to the purchaser a specific item of personal, or parcel of real, property of which he had...
- Contract of saleContract of saleA contract of sale is a legal contract an exchange of goods, services or property to be exchanged from seller to buyer for an agreed upon value in money paid or the promise to pay same...
- Delivery orderDelivery orderA Delivery Order is a document from a consignor, a shipper, or an owner of freight which orders the release of the transportation of cargo to another party....
- DistributionDistribution (business)Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
- MarketingMarketingMarketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- Order (exchange)Order (exchange)An order in a market such as a stock market, bond market, commodity market or financial derivative market is an instruction from customers to brokers to buy or sell on the exchange.These instructions can be simple or complicated...
(stock market) - ReplenishmentReplenishment- Military :* Replenishment oiler* Underway replenishment, a method of transfer between naval ships* Vertical replenishment, another method of transferring supplies- Photography :...
- Supply chainSupply chainA supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to...