Invoice vs. receipt: Understanding the difference.
Issuing invoices and receipts is an integral part of any business. Learn the purpose of each, and when you should use them.
The main distinctions between an invoice and a receipt involve the purpose of each document and the timing of when they are sent.
What is an invoice?
An invoice is a professional document requesting payment for goods or services. It typically contains standard line items, including explanations for every amount shown. Depending on your type of business, you may request payment before or after transferring goods or providing services.
You can send your invoices digitally or physically. Once sent, they can be used for payment tracking purposes. A dedicated invoice numbering system will help you identify which invoices have been paid and which ones are still outstanding.
What is a receipt?
A receipt, on the other hand, is proof of payment. You would send this documentation after an invoice has been paid by your customer or client.
While there is no specific legal standard regarding receipts, your receipts should include information about the goods or services purchased, such as the price, quantity, and date of the transaction. You may also choose to include payment details, such as a bank transfer or credit card payment.
Because receipts typically have less information than invoices, it’s advisable to keep both invoices and receipts for your accounting purposes.
Can an invoice be used as a receipt?
Since an invoice is a request for payment, not proof of payment, you shouldn’t use an invoice in place of a receipt. Once a customer or client pays your invoice, make sure to provide a separate receipt.
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