What's the difference between an invoice and receipt?
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What's the difference between an invoice and receipt?
If you’re a business owner, then you’ll probably have heard of receipts and invoices! 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 serve different purposes. Understanding first what they are will help explain how they’re different.
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:
What is the difference between an invoice and a bill?
What is a receipt?
A receipt is proof of purchase which you’d give to customers after they’ve paid for your goods or services. It can also act as proof of ownership. Receipts typically include details of the goods or services purchased, including price, quantity and any discounts given. They may also include details of the customer’s payment method. There's no legal requirement for what information a receipt must include, so it can sometimes be as simple as a handwritten note with the amount the customer has paid.
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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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