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Both invoices and receipts seem to document your purchase, but the information they provide and their purpose in the transaction can be different.
One acts as a prompt for payment, while the other serves as proof of a completed transaction.
Below I’ll clear things up for you and discuss how each plays a unique role in your financial transactions.
Key takeaways
- An invoice is a request for payment issued before a transaction is complete, while a receipt is proof of payment given after a transaction is complete.
- Invoices are more detailed, including breakdowns of items or services, quantities, prices, and payment terms. Receipts are simpler, typically showing the seller’s information, date of purchase, and total amount paid.
- Invoices are used by businesses to track sales and manage cash flow, while receipts are used by buyers to track purchases and for warranty or return purposes.
FreshBooks is accounting software built for business owners and their clients. Balancing your books, client relationships, and business isn't easy.
What is an invoice?
An invoice is a formal document issued by the seller, typically after a sale or providing a service, that clarifies exactly what the buyer owes.
You can see it as an itemized breakdown of the transaction.
The invoice usually starts with identifying information for both the seller, like their company name and contact details, and the buyer, including their name and shipping address if applicable.
Then comes the key part: a breakdown of the products or services purchased. This will detail what was bought or the service rendered, how much of it (quantity), and the agreed-upon price for each item.
By multiplying these two numbers (quantity x price), you’ll see the total cost for each item listed.
The invoice doesn’t stop there. It’ll also show the sum of all these individual item costs, giving you a total of how much the buyer owes. Sometimes, there might be additional charges like sales tax or shipping fees added to this total.
To make sure the buyer understands when the money is due, the invoice will also lay out the payment terms. This includes the due date by which the seller expects the payment and what methods of payment are accepted (like cash, check, or online payment).
What is a receipt?
A receipt is a confirmation you receive from a seller after you’ve completed a purchase or paid for a service.
It includes the seller’s information, like their business name and sometimes their contact details. Most importantly, it’ll display the date of the transaction, which serves as a timestamp for the purchase.
Following this will be a breakdown of what you bought or the service provided. This might be a general description or a list of specific items depending on the seller’s systems.
The key detail on the receipt is the total amount you paid. This verifies how much money was exchanged for the goods or services. Sometimes, the receipt might also show how you paid (cash, credit card, etc.), but that’s not always included.
Key differences between invoice and receipt
Let’s break down the key differences between invoices and receipts:
| Feature | Invoice | Receipt |
|---|---|---|
| Timing | Issued after a sale or service but before the buyer pays | Issued after the buyer pays for the goods or service |
| Purpose | To inform the buyer about what they owe and request payment | To serve as a record that the buyer has paid for the transaction |
| Seller information | Always includes the seller’s business name and contact details | Usually includes the seller’s business name, but contact details may not be present |
| Buyer information | Often includes the buyer’s name and shipping address (if applicable) | Buyer information is typically not included, but may be required for certain transactions |
| Item breakdown | Provides a detailed list of each item or service purchased, including a description, quantity, and price per unit | Offers a general description of the purchase or a list of specific items, depending on the seller’s system |
| Quantity | Shows the exact number of units purchased for each item | May not show the quantity if only one unit was purchased or for services |
| Price per unit | Lists the individual price for each item | Lists the individual price for each item |
| Subtotals | Calculates the total cost for each item (quantity x price) | Not included, as there’s usually just one total price for the entire purchase |
| Additional charges | May show separate charges for sales tax, shipping fees, or other applicable costs | Not included, as these are typically incorporated into the final price |
| Payment terms | Outlines the due date for payment and accepted payment methods (cash, check, etc.) | Not applicable, as payment has already been received |
The bottom line
Now armed with this knowledge, you can confidently tell the difference between these two documents. Remember, there’s no single answer that fits every situation.
The best choice depends on your specific needs—whether you’re a seller requesting payment or a buyer needing proof of purchase.
FAQs
Can I send a receipt instead of an invoice?
No, a receipt isn’t a substitute for an invoice. An invoice is sent before a transaction to request payment, while a receipt confirms that payment has been received.
Can I use an invoice as proof of payment?
An invoice itself isn’t ideal proof of payment, as it only shows what’s owed. It can be a temporary record, but for stronger proof, you’d need a receipt showing the payment was completed.
Do I need to issue both an invoice and a receipt?
Not always. If it’s a small purchase and immediate payment, a receipt alone suffices. But for larger transactions or credit purchases, both an invoice (requesting payment) and a receipt (proof of payment) are recommended.
FreshBooks is accounting software built for business owners and their clients. Balancing your books, client relationships, and business isn't easy.