There are some terms today that are often used interchangeably. A common example is an invoice and receipt even though they mean entirely different things. While the words themselves might not be new to you, the differences might be. It also doesn’t help much that both are used within the accounting part of a business. As a new entrepreneur, solopreneur, or freelance professional curious about the difference; here is a detailed difference between an invoice and a receipt.
For entrepreneurs and small business owners, keeping detailed records of every transaction is essential. It’s impossible to manage your money, take care of your business’ taxes, or maintain track of your business’ performance without a record of purchases, refunds, or exchanges. It is equally crucial for your clients to have proof of the transaction for their own financial records, as well as in case they experience problems with their orders.
As a business owner, you must choose the record-keeping strategy that works best for your company. Receipts and invoices are typically used by businesses to record transactions for both themselves and their clients, so you’ll probably need to do the same. Despite the fact that these two documents serve comparable purposes, they are very dissimilar from one another. Knowing how these two papers differ from one another, what details to put in each one, and when to provide consumers a receipt or an invoice is crucial for keeping your business operating effectively.
What is an invoice
An invoice is a legally binding document that outlines a list of items(services or products) purchased and the sum owed by the buyer. This is proof that an order was made and is also a means of requesting payment from a buyer. An invoice is issued by a seller to a buyer listing the following details.
- Business details (name, address, contact, etc.)
- Client name
- Invoice number
- products /services purchases
- Taxes if applied
- The individual cost of items
- The total amount owed to the seller
- Dates issued and date of supply
Invoices can be sent electronically in addition to the more conventional methods of printing them out and mailing or faxing them to a client. Since almost all of your business is already done online, electronic invoices, also known as e-invoices, are unquestionably the ideal choice for e-commerce companies. For both traditional and e-commerce enterprises, an efficient online invoice management software can streamline and accelerate the entire invoicing process. Your invoices, whether they are printed on paper or sent electronically, must be carefully read in order to guarantee that you are compensated for your services in a timely and accurate manner.
What is a receipt
A receipt is a document confirming a client has made payment for a product or service purchased. This is issued after a client has made payment and it contains the following.
- Business details
- Transaction date
- Items purchased and prices
- Transaction total
- Method of payment
A receipt is evidence of payment, whereas an invoice is a request for payment. It is proof that a customer received the goods or services they ordered from a company, or, in the other direction, that the company was fairly compensated for the products or services it delivered to the consumer. Receipts are almost always given to customers after they make a purchase, making them typical among both traditional and e-commerce enterprises. Receipts are not legally required to be provided for all transactions, but they are almost always given to customers after they make a purchase.
Customers may receive receipts and invoices either physically or online. They are often printed or handwritten immediately at brick and mortar stores, while some also provide electronic receipts received through email. Even though some e-commerce shops may opt to physically mail it when sending the things out for delivery, many of them give email receipts to customers right away after they make a purchase. Since nearly 70% of Americans prefer paper receipts, even businesses that just do online transactions should think about including them in product deliveries.
Receipts are an important proof-of-purchase document for both customers and businesses, regardless of how they are distributed. Customers require receipts in the event that they have problems with a product or wish to return or exchange it, and you must be able to verify that a customer’s claims are correct. Keeping track of customer orders and receipts can be difficult, especially if the customer wishes to return or exchange something; a high-quality order management system can make it much easier to track orders, send accurate receipts, and assist customers who require assistance after the transaction.
The difference Between Receipts and Invoices
While there are things common with an invoice and a receipt, they both serve and fulfill different purposes. For instance, an invoice is issued before payment is made and a receipt just after payment. The primary purpose of an invoice is to give a client details about what they are to pay for and inform them to make payment. A receipt on the other hand only confirms that a payment has been made. This is vital information for keeping track of company earnings as well as for client records.
Because receipts and invoices are issued at different stages of the sales process, they serve different functions. Invoices are issued before the customer sends payment, whereas receipts are issued after the payment is received. The invoice serves as a payment request, and the receipt serves as proof of payment.
This also means that each document requires unique information. The invoice should include a detailed breakdown of the products and services, whereas the payment receipt should only show the amount paid and any outstanding balance. Both documents should be labeled “Invoice” or “Receipt.”
How to write invoice and receipt
Now that you know the difference between an invoice and a receipt, how do you write one? There are several ways you can craft a decent invoice and company receipt for consistent usage. The first step in accomplishing any of these is by understanding the information each document requires. The second step is by creating a professional template and sticking to it. Depending on whether you offer a receipt on paper, you might have to print out a template to fill. Although, creating a professional invoice might cost you a few bucks. Alternatively, you can create a professional invoice if you offer invoices and receipts via email. In a few seconds, you can create a professional invoice without any guide. If you would like to create your invoice and receipt from scratch, here is the information you need to include.
What information must be in an invoice
- Company details which include business name, address, phone number, and or email
- Invoice number for validation
- Client name
- Itemized list of product/services offered alongside individual prices
- Date issued and date due
- The total amount owed including Taxes if any
What information must be in a receipt
- Company details
- Date issued
- Client name
- Items purchased and individual prices
- Total amount
- Payment Type
How to issue a receipt and invoice
There are quite a several ways to issue a receipt or invoice. An invoice or receipt can be typed, handwritten, issued on paper, or sent electronically. However, ultimately they revolve around paper and electronic methods.
While brick-and-mortar stores are not seeing a decline in sales, e-commerce is still thriving. This means that more businesses and individuals are relying on electronic invoices. With invoice generator, you can send receipts and invoices straight into clients’ email.
The oldest and still trending way to issue an invoice for brick-and-mortar stores and shoppers who still prefer walk-ins. You can opt to create custom invoices or buy an invoice book that might cost a few bucks or even opt for built-in printers to produce receipts.
Pay Stubs Now: Leaders in financial documentations
There are several documents business owners have to worry about regularly. One of such documents is a pay stub. In most states, providing one is mandatory and can cost quite the sum to make. Typically, businesses have to partner with payroll companies to issue this regularly. However, as a new business looking to save cost, Paystubsnow are leaders in providing you this service at highly competitive pricing. Other than pay stubs, the company also offers 1099 MISC form, and a host of other financial documents
When should you give an invoice?
Invoices are typically issued immediately after a client’s order(s) have been fulfilled. For product-based businesses, an invoice accompanies the delivery. With services, however, an invoice is issued after an order has been fulfilled. This is a timesheet of the number of hours worked in hourly jobs.
Does an invoice mean you’ve paid?
An invoice is a document used to request payment from a client. This means that an invoice is issued even before a client has to pay. An invoice does not mean you have been paid.
Can I take legal action if a client refuses to pay an invoice?
An invoice is a legally binding document expressing a deal between two or more people (a business and an individual or two individuals). This document is legally binding, shows proof of purchases, and can be used to take legal action when a client refuses to make a payment. A client can also use an invoice to take legal action in cases where what was itemized was not what was paid for or delivered.