What's the difference between an invoice and receipt?

In a nutshell, the difference between an invoice and a receipt is that invoices list goods or services provided and the amount owed, while a receipt confirms payment and serves as proof of purchase.

People often think that there's not much difference between invoices and receipts, or that they’re actually the same thing. After all, both an invoice and a receipt are documents related to the sales process. But they play distinct roles in your business.

What is an invoice?

An invoice is a request for payment that you’d send to a customer after you’ve sold them your goods or services, but before they've been paid for. An invoice will include important information about the transaction, such as:

• date of invoice
• seller details
• invoice reference
• details of the goods or services supplied
• total amount due
• payment terms.

More on invoicing:

How to write an invoice

What is the difference between an invoice and a bill?

What is an open invoice?

What is a Receipted Invoice?

A receipted invoice is an invoice that has been marked as paid, serving as proof that the payment has been received. It combines the functions of an invoice and a receipt, showing the details of the transaction along with confirmation of payment.

What is a receipt?

A receipt is proof of purchase given to customers after payment for goods or services. It acts as proof of ownership and typically includes details like the price, quantity, any discounts, and the payment method. While there’s no legal requirement for the exact information, a receipt can be as simple as a handwritten note with the paid amount.

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The difference between an invoice and receipt

While they're both related to cash flow, there are some key differences between invoices and receipts:

• an invoice is a request for payment; a receipt proves that the customer has paid
• invoices are issued before payment; a receipt is issued after payment
• invoices list the total amount due and the payment deadline; receipts detail how much has been paid and how
• you can use invoices to track the sale of goods or services; a receipt acknowledges payment.

Can you use an invoice as proof of purchase?

You can use invoices as proof of a formal agreement between buyer and seller or proof that a customer has requested goods and services from you. However, you can’t use an invoice as proof that goods or services have been paid for.

When to use invoices and receipts in business

You should issue an invoice to a customer before they pay. It should itemise the goods and services the customer requires and calculate what is owed to you for your time and materials, if appropriate. You can send invoices to customers by email, in person or through the post.

You should give a receipt to your customer once they’ve paid their invoice; it acts as proof of payment. Ideally, you’d give them a receipt immediately after payment. But if you can’t automatically issue receipts, then you'll need to create one and send it to the customer as soon as possible. You’ll also want to update your accounting system to note that the payment has been made.

If you’re self-employed, you'll need to keep copies of all your self-employed invoices and receipts for when the time comes to submit your self-assessment tax return to the HMRC.

How to improve your invoice payments with iwocaPay

iwocaPay takes the hassle out of getting your invoices paid in full and on time. When you add an iwocaPay link to your invoice, your customer can choose the flexible payment options that suit them. They can either pay upfront or spread the cost across three monthly instalments (subject to approval). Whether they choose to pay upfront or spread the cost over 90 days, you still get paid upfront. It's quick, convenient and everyone benefits.

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