Difference Between an Invoice and a Receipt
There are some terms today that are often used interchangeably. A common example is an invoice and receipt even though they mean entirely different things. While the words themselves might not be new to you, the differences might be. It also doesn't help much that both are used within the accounting part of a business. As a new entrepreneur, solopreneur, or freelance professional curious about the difference; here is a detailed difference between an invoice and a receipt. For entrepreneurs and small business owners, keeping detailed records of every transaction is essential. It's impossible to manage your money, take care of your business' taxes, or maintain track of your business' performance without a record of purchases, refunds, or exchanges. It is equally crucial for your clients to have proof of the transaction for their own financial records, as well as in case they experience problems with their orders.As a business owner, you must choose the record-keeping strategy that works best for your company. Receipts and invoices are typically used by businesses to record transactions for both themselves and their clients, so you'll probably need to do the same. Despite the fact that these two documents serve comparable purposes, they are very dissimilar from one another. Knowing how these two papers differ from one another, what details to put in each one, and when to provide consumers a receipt or an invoice is crucial for keeping your business operating effectively.
What is an invoice
An invoice is a legally binding document that outlines a list of items(services or products) purchased and the sum owed by the buyer. This is proof that an order was made and is also a means of requesting payment from a buyer. An invoice is issued by a seller to a buyer listing the following details.- Business details (name, address, contact, etc.)
- Client name
- Invoice number
- products /services purchases
- Taxes if applied
- The individual cost of items
- The total amount owed to the seller
- Dates issued and date of supply
What is a receipt
A receipt is a document confirming a client has made payment for a product or service purchased. This is issued after a client has made payment and it contains the following.- Business details
- Transaction date
- Items purchased and prices
- Transaction total
- Taxes
- Method of payment
The difference Between Receipts and Invoices
While there are things common with an invoice and a receipt, they both serve and fulfill different purposes. For instance, an invoice is issued before payment is made and a receipt just after payment. The primary purpose of an invoice is to give a client details about what they are to pay for and inform them to make payment. A receipt on the other hand only confirms that a payment has been made. This is vital information for keeping track of company earnings as well as for client records.Because receipts and invoices are issued at different stages of the sales process, they serve different functions. Invoices are issued before the customer sends payment, whereas receipts are issued after the payment is received. The invoice serves as a payment request, and the receipt serves as proof of payment.This also means that each document requires unique information. The invoice should include a detailed breakdown of the products and services, whereas the payment receipt should only show the amount paid and any outstanding balance. Both documents should be labeled "Invoice" or "Receipt."How to write invoice and receipt
Now that you know the difference between an invoice and a receipt, how do you write one? There are several ways you can craft a decent invoice and company receipt for consistent usage. The first step in accomplishing any of these is by understanding the information each document requires. The second step is by creating a professional template and sticking to it. Depending on whether you offer a receipt on paper, you might have to print out a template to fill. Although, creating a professional invoice might cost you a few bucks. Alternatively, you can create a professional invoice if you offer invoices and receipts via email. In a few seconds, you can create a professional invoice without any guide. If you would like to create your invoice and receipt from scratch, here is the information you need to include.What information must be in an invoice
- Company details which include business name, address, phone number, and or email
- Invoice number for validation
- Client name
- Itemized list of product/services offered alongside individual prices
- Date issued and date due
- The total amount owed including Taxes if any
What information must be in a receipt
- Company details
- Date issued
- Client name
- Items purchased and individual prices
- Taxes
- Total amount
- Payment Type