What is the difference between an invoice and a receipt? At a very high level, an invoice is a request for payment, whereas a receipt is proof of payment made.
When you venture out as a small business owner, you’ll encounter new documents and accounting terminology. While a lot of this language has crossed over to every day usage, it’s often a good idea to go back to basics and be crystal clear on the definition of these things.
Sometimes, these words are incorrectly used interchangeably. So, today let’s get crisp on the difference between an invoice and a receipt.
High Level: What is an Invoice versus a Receipt?
What Is an Invoice? “A Request for Payment”
An invoice is issued by the seller / provider of goods and services and indicates the amount of money DUE for goods and services provided. It is usually sent after these goods and services have been provided.
In addition to showing the invoice amount due, it also provides terms of payment, including due date and payment method.
The invoice serves as a record for both issuer and recipient of the transaction. Both parties will keep copies of receipts for their accounting and tax purposes.
Learn more about invoices here.
What Is a Receipt? “Proof of Payment”
A receipt is a confirmation of a payment made. We are familiar with receipts in every day practice… we get receipts at shops, restaurants and more after we have paid for goods and services.
Just as in consumer shopping, a receipt proves when and what you bought. Most people hang on to receipts for the following reasons:
- To confirm transactions on their bank / credit card statements
- For tax and accounting purposes, if the expense is tax deductible
- In case of returning or disputing goods/services
What an Invoice and Receipt Have in Common
It’s easy to understand why sometimes the terms invoice and receipt are used interchangeably. They have a lot in common:
- Both are issued by the vendors (i.e. those providing goods or services)
- Both are legal documents
- Both list vendor and customer information
Do Clients Ever Need Both an Invoice and a Receipt?
So, who gets a receipt, who gets an invoice and do clients ever receive both?
- When a Client/Customer pays immediately with cash or credit card: A receipt is provided. There is no need to send them an invoice.
- When a Client/Customer owes money: An invoice is provided. This details the invoice amount, payment terms and more.
- When a Client/Customer pays an invoice: A receipt can be issued, but often this is not expected. If you’re using professional invoicing software, the “PAID” invoice also serves as a receipt.
Recap: What Is the Difference Between an Invoice and a Receipt?
So, to recap, there’s a pretty significant difference between an invoice and receipt…
- An invoice is a request for payment. You send an invoice to your clients after you have provided goods or services.
- A receipt is proof of payment. You provide a receipt to a customer or client after they’ve paid for a good or service.