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 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 or bid created |
| Buyer and seller agree to transaction | Purchase order recorded | Sales order recorded |
| Product is shipped from seller to buyer | Packing slip, 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 to buyer | Match packing slip with purchase order and invoice; record purchase in financial accounts under accounts payable | Record sales order in financial accounts under accounts receivable |
| 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 |
Read more about this topic: Order (business)
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