A customer has accepted a quote, and I convert it to a sales order. He then has two lots of billable time I want to put on the invoice alongside the order. Why is the sales order not invoicable like the billable time?
Your description of what can be done is incomplete. A sales order can be copied to a sales invoice. Thus, it can be turned into a sales invoice.
The procedure with billable time is different because of basic accounting. A sales order is not a transaction. No revenue has been generated. Billable time, however, becomes an asset when someone performs work. That asset can be sold, just like inventory, which is what invoicing does. So Manager includes the feature to convert accrued billable time to an invoice.
I would have thought that a sales order is a transaction. A sales order, to my understanding, is a contract to provide goods and services and get paid in return, regardless of which comes first, so it is as good as a transaction.
Likewise, when I head to the hardware store and give them a purchase order and collect my goods, that purchase order is a contract to take those goods and then pay a totalled invoice at the end of the month, rather than paying upfront every time I attend the store.
The difference here, to my understanding, is a sales order goes from business > client, and a purchase order goes from client > business.
Is there something I’m misinterpreting here? I am quite new to this.
Yes. A sales order is nothing but a record that someone has ordered something. No goods or services have been delivered and no money has changed hands. A contract requires three elements: offer, acceptance, and consideration. A sales order encompasses only the first two. No transaction has yet occurred. The contract is not complete.
In your hardware store example, goods were delivered. A transaction has taken place, even though the contract is not fully satisfied. But money (consideration) is legally owed. And the goods themselves are part of the consideration.
No, you have it backwards. A sales order is your business’ record of the customer’s purchase order (even if verbal). You have delivered nothing. A purchase order is a buyer’s indication to a supplier that they want to buy something. The supplier might deliver immediately, as in your hardware store example, or later. Whenever delivery happens, it can be on a cash or credit basis. Your hardware purchases are credit purchases, with credit extended on the basis of the promise to pay implied by your purchase order. The contract is not fully complete, but a transaction has occurred because ownership of goods was transferred.
In addition to @Tut’s clear explanation it is also helpful to consult Accounting coach on such things. For this example What is the accounting entry when an order is received? | AccountingCoach they conclude
While there is no accounting entry in the general ledger, it is likely that the company will create a record outside of the general ledger to track the order and to schedule various activities that will be needed to ship the products to the customer.
Most businesses we support are small and have low invoice volumes and therefore we skip the Sales Order records altogether and create directly an invoice based on a purchase order.
Thank you all for the responses, I understand this better now.