As a business owner, an entrepreneur or a layman , the issue of receipt vs invoice usually brings confusion because the difference between these two documents isn’t always clear.
Though they are all issued during the sales process, they don’t perform different function.
In this article I will help you understand what invoices and receipts are, their differences, what they are used for, when they are used, information that must be included on them and also provide you with a sample of both.
What is a receipt?
A receipt is an important document issued by business or a person to a customer after a customer has paid either in full or part for goods or services rendered. It serves as a evidence of payment for both the business and the customer.
Receipts must include serial number, business details, customer details the date of payment, the total amount paid (both in figures and words) and any remaining balance, and if invoice was issued before the payment the original
invoice number must be quoted.
The sample receipt below if from Stripe, showing some key differences between a receipt and an invoice.
It shows, the total amount paid, date of payment, payment method, invoice number receipt number, customer and business details.
What is an invoice?
Since invoices are official busines document there are required fields that must
be included on them.
This includes invoice number, date of issue, payment due date, business details, customer details, a list and breakdown of the goods or services rendered and the total amount due for each amount.
Invoices are issued to a customer after goods or services have been provided and in some cases after negotiation and a particular amount has been agreed on.
The sample invoice below is from Canva giving you a visual representation of what invoice looks like and how it differs from a receipt.
This particular invoice sample below is for a web design and logo service, it shows business details, client details, date issued, invoice number, description of service rendered and the amount charged, total amount due, due date and even bank information.
Receipt Vs Invoice – What’ Is The Difference?
In simple terms, an invoice is issued to a customer before payment is made, while a receipt is issued after a payment has been received from a customer.
Invoice acts as a request for payment from a customer, and receipt also acts as a proof of payment. Please note that both documents are labeled “Invoice” and “Receipt” respectively.
Explaining further, invoices are issued before a customer makes payment for goods or services detailing the goods or serves they are paying for and the exact amount to be paid.
Receipt is issued after either full or part-payment has been done by the customer for goods and services. Receipts only show the total amount paid and any balance due.
Should I issue Both an invoice and a receipt?
To issue both an invoice and a receipt or not depends on your industry, internal business structure, the country of origin and laws that governs doing business.
For example in United Kingdom, invoices must be issued if both the business and the customer are all registered with VAT.
Concluding On Invoice Vs Receipt Differences
In doing business, receipt and invoice are very paramount, as a business it helps you keep record of your sales and serves as authenticator during audits, as a customer receipt is the only document that proves that you have duly for goods or services bought or rendered to you. Note that it is the only document that will guarantee a refund incase something goes wrong.
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