The difference between invoices and receipts

Quick insights

• An invoice is a document sent from a business to a customer or another business requesting payment for goods or services.
• A receipt is a document showing that a customer has paid a business for goods or services.
• Receipts and invoices have some similarities but are used to track payment at different stages of the sales process.

Many business owners use a combination of invoices and receipts to track payments. While both documents offer insight into the sales process and the business’ overall cash flow, they have different purposes.

Read on to learn some differences between invoices and receipts, when they are used and what information each includes.

What is an invoice?

Businesses issue invoices after a service is provided or goods are delivered. In short, an invoice is a request for payment. Invoices are more common for ongoing business relationships where the payment and terms are agreed upon in advance.

For example, your company may employ freelancers. Both parties will usually sign a contract before the work begins regarding expectations and pay rate. Then, the freelancers will send invoices as they complete assignments.

Another example is home repairs and renovations. The contractor or repairperson will typically create a contract with an estimated subtotal based on the agreed-upon work. Then, they will send the customer an invoice after the work is fully completed.

How to write an invoice

Invoices generally include a detailed breakdown of the products or services provided to the customer. Invoices are legally binding documents outlining the terms of a transaction, so creating an accurate paper trail can be beneficial.

Here’s the information that is generally included on an invoice:

• Business name and contact information
• Customer name and contact information
• Invoice number (a unique identifier for the invoice)
• Date of service
• Date of invoice creation
• Payment details (total, due date, acceptable forms of payment, etc.)

What is a receipt?

Receipts act as proof of payment for goods or services received. They are typically used for smaller or one-time purchases where payment is made at the time of the transaction.

Business owners issue receipts when they want to provide immediate confirmation of payment to customers. Say you go grocery shopping. You’d need to pay for your groceries to take them home (and you receive a receipt at checkout).

Receipts are useful documents for customers and they also help businesses keep accurate records of sales for bookkeeping purposes.

How to write a receipt

Receipts are typically issued as physical copies or as emails (or, in some cases, both). Regardless of its form, a receipt usually includes the following details:

• Business name and contact information
• Transaction or order number
• Goods/services provided
• Quantity of goods
• Price of goods
• Payment date
• Total price (with applicable taxes, fees and discounts)

You may want to ensure that receipts contain the above information, as you may be able to use them as evidence for warranty claims, returns and expense reimbursement.

Differences between invoices and receipts

While both invoices and receipts include similar details about payment, they have a few key differences:

• When they are issued to customers: Invoices are sent before payment is received, and receipts are sent after payment is received.
• Document details: Invoices include details about how much is owed, acceptable forms of payment and due dates. Receipts, on the other hand, show that payment is completed.
• Accounting purposes: Receipts show proof of a sale/business income, or an expense. Invoices show that the payment has not been received yet, so they are recorded as accounts receivable (or a balance of money due to a business for services).

Should you issue both an invoice and receipt?

In many cases, only a receipt is necessary. If you make a purchase at an online store or dine out at a restaurant, for example, it’s unlikely that you would receive an invoice.

But because an invoice is not proof of purchase, a receipt is still necessary when an invoice is issued for ongoing work. The invoice shows that payment is due, and a receipt confirms payment was received.

Can you record an expense without an invoice or receipt?

Some businesses choose to manually track expenses through spreadsheets, but this process can become more difficult as a business grows and makes more sales. Accounting and expense management software may help businesses organize finances and keep track of invoices and receipts.

Certain business credit cards also integrate with bookkeeping software to simplify accounting, including Chase Ink small business credit cards. Learn more about the Ink suite of business credit cards to see which may be a good fit for your business.

In summary

Knowing differences between receipts and invoices can help business owners better manage their records for accounting purposes. As a business grows, it may be wise to consider account management software to help keep track of invoices, receipts and expense tracking.

Using a business credit card that offers expense management features is another way to help small business owners track expenses and manage their finances. Consider exploring our business credit card options when you’re ready to take the next step.