Invoice vs Receipt : Key Differences You Need to Know

Businesses involve lots of receipts and invoices. Both documents are used to record sales that aid in keeping track of every transaction of the business. It will help any business to organise all the payments. Is invoice and receipt the same thing? An invoice and a receipt are almost similar but they are different. Their purpose is different.

What is an Invoice?

If your business has provided goods or services to the customer, you need to issue an invoice to the buyer requesting payment for the same. An invoice is given by the business to the customer. The invoice is also known as a bill of sale. We know that an invoice is a document requesting payment, it is also used as a record for the accounting process(like physical evidence).

→ Given below are some characteristics of the Invoice :?

• It is a document to request payment from the customer.
• Invoice is issued first before the payment.
• An invoice is not issued for every type of sales transaction.
• It cannot be used as physical evidence for payment confirmation.
• Invoices are of different types and it it is distinct for each industry.

For example, proforma invoices, are a type of invoice sent to the customer before an official invoice is rendered. This invoice holds no legal value. It gives information regarding the owed cost of the goods or services. One more type of invoice is the commercial invoice, which is used as a customs document for international trade. Hence, the bills and the invoice are similar as both documents request payment from the customer.

What is an Invoice used for?

A customer is provided with an invoice after the customer agrees to the sale of goods or services provided by the business. An invoice is issued to the customer before the goods are delivered or at the same time. In the case of service, the invoice is issued before or directly given after the service is completed.

An invoice can be issued to the buyer in paper format or can be sent through the mail digitally. However, sometimes it is mandatory to issue a physical copy of the invoice to the buyer.

Relying on automation is also the best option for businesses to create invoices. Leveraging invoicing software can help in creation, issuing and approvals. So, once the invoice is rendered to the customer, the payment owed and the payment terms are clearly mentioned in that document. It remains as proof of purchase.

How do you Format an Invoice?

Officially, there is no formal template to format an invoice. However, it is vital to include pieces of information to deliver appropriate, and accurate data to the customer.

→The invoice will include the following:

• Logo and the name of the business
• Contact information of your business
• Client’s contact details
• Unique invoice number
• Date of the invoice created or issued
• List all the goods or services purchased in detail
• Quantity of goods or services provided and their allocated price
• Mention the total amount including taxes and fees
• Include payment terms and payment due date
• Currency and the payment method
• Bank account details

Also Read :?What is Invoice Management System – Definition, Importance and Types

What is a Receipt?

A receipt is also a crucial piece of document which is used as proof of payment. It is also known as payment receipts or sales receipts.

→Here are some of the characteristics of receipts:

• Receipts are issued to the customer only after the payment has been made.
• Any business or customer considers receipt as proof of payment
• It is also used to verify if a purchase has been made from some other business.
• In some countries, receipts are mandatory above a certain price range.
• It can be used as proof for any legal proceedings.

The main purpose of a receipt is to verify a payment. A receipt can be used as proof when requesting a refund, or during an exchange of goods or to claim a warranty policy. Besides, this document is beneficial for accounting and legal purposes. The receipt contains important details such as the date, the amount paid and product information.

A receipt is issued as a paper document or sent to the customer electronically. The receipt will be sent to the customer through email or online messaging app. However, digital invoices are mostly used by businesses.

How to Format a Receipt?

Even for receipt, there is no official format. However, it should contain the following information :

• Name of the business and logo
• Contact information of the business
• Date of sale or service
• Products and services list provided by the business.
• Price of the goods and services sold
• Discounts, coupons or promotions are included
• Total paid amount
• Sales and service tax are included
• Additional fees are also included
• Transactions confirmation statement(approved, declined, authorized, not authorized)

Click here to know more about Key Difference Between an Invoice and a Receipt.