Invoice vs. Receipt: The Detailed Difference You Need to Know

Tuesday, January 10, 2023

Invoice vs. Receipt: The Detailed Difference You Need to Know

If you have never dealt with financials before and all you ever did was write an invoice to send to your clients, then it’s normal not to know the difference between an invoice and a receipt.

When it comes to financial statements in business and finance, invoices and receipts are two commonly used documents with distinct differences in purpose and use.

These documents are both critical for tracking financial records, but they are used at different stages of the payment process and serve other purposes.

Knowing the differences between invoices and receipts is crucial for effectively managing your business or financial affairs as a business owner.

What is an Invoice?

An invoice is a document a seller sends to a buyer to request payment for goods sold or services provided for a specific time frame.

The invoice usually contains information about the buyer and seller, a description of the goods or services, the unit price, the total amount due, the invoice due date, and the payment terms.

Invoices can be issued for one-time transactions or ongoing services, such as a monthly subscription, and may include any applicable sales tax or fees.

You need to check the tax return regulations in your country before issuing any invoices and receipts and ensure that your calculations are accurate on the total amount. 

A Person Doing Their Taxes

Invoices provide a clear record of what has been purchased and the amount that is owed and serve as a reminder to the buyer to make the payment according to the specified terms.

Steps on Writing an Invoice

Portant's Free Invoice Example Template

Here is a list of steps to follow when creating an invoice:

  1. Identify your business: Include your business name, contact information (such as your address, phone number, and email), and any relevant tax identification numbers.
  2. Identify your customer: Include the name and contact information of the person or business you are invoicing. Describe the goods or services: Clearly outline your products or services, along with any relevant details or specifications.
  3. Include the cost: Clearly state the total cost of the goods or services and any applicable fees or taxes.
  4. Add any terms or conditions: If there are any special terms or conditions related to the invoice, such as a payment deadline or late fee, include them in the invoice.
  5. Include a payment method: Provide information on how the customer can pay the invoice, such as by check or an online payment system.
  6. Invoice number: Adding an invoice number helps keep track of invoices and transactions, making the accounting department’s job easier.
  7. Review and send the invoice: Carefully review the invoice to ensure that all information is accurate and complete. Then, send the invoice to the customer using your preferred method (such as email or snail mail).

If you want a more detailed guide on writing an invoice, check our guide on writing a professional invoice.

If you need to invoice your clients promptly, use Portant's free Google sheets template and get started sending invoices in a matter of minutes.

What is a Payment Receipt?

A Receipt Example Being Hold by a Women

A receipt is a document that confirms a financial transaction has been completed. It includes details such as the names of the buyer and seller, a description of the goods or services, their unit price, the total amount, and the transaction date.

Receipts can be issued by businesses, individuals, or organizations and serve as proof of purchase of the exchange of goods or services for money.

They are often used to keep track of personal or business purchases and can be useful in resolving disputes or disagreements about the terms of a transaction.

In addition to providing evidence of payment, receipts can also be used to claim a tax deduction or to return or exchange an item.

Receipts can be in the form of printed paper or electronic receipts. Most businesses that operate physically by owning a store issue paper receipts. On the contrary, online businesses mainly issue electronic receipts. Exceptions could be E-commerce businesses that deliver products to their customers.

These types of businesses sometimes include customers' receipts in the packaging of the goods bought by their customers.

Person Handing Over a Package that Includes a Receipt to Another Person

While digital receipts are more convenient for customers for reasons such as not losing your receipt and saving the environment, surprisingly, people prefer paper receipts more.

In a survey conducted by Green America 42% of people said they prefer paper receipts. The reason is that the surveyed people feel safer with printed receipts than digital ones.

Receipts play a crucial role in verifying and documenting financial transactions.

Steps on Writing Payment Receipts

To create a valid receipt, including all necessary information is essential. Here are some guidelines for writing a receipt as a business owner:

  1. Begin by including the date of the transaction, the buyer’s name, and the seller’s name.
  2. Next, list the exchanged goods or services in detail, including the quantity, unit price, and total price for each item.
  3. Calculate the total amount paid by adding the total prices for all items on the receipt.
  4. Add any relevant taxes or fees to the total amount calculation if applicable.
  5. Specify the payment method, such as cash, check, or credit card. If a credit card was used, include the last four digits of the card number and the cardholder’s name.
  6. If the receipt is being issued for a returned or exchanged item, include a description of the return or exchange policy.
  7. Finally, include your contact information and any relevant terms or conditions.

By following these steps, you can write a receipt that accurately records the transaction and helps both the seller and buyer understand the terms of the exchange.

Automate Your Sales Process with Portant

Are you fed up with the laborious task of creating and sending invoices to your clients? This can be especially burdensome if you have many customers.

Fortunately, there is a solution that can help you streamline your invoicing process and save you time and energy: Introducing Portant.

Portant is an effective invoicing platform that allows you to quickly and easily create professional invoices with Google Sheets and Docs. With Portant, you can generate and send invoices to your customers in minutes, and even set up payment reminders.

One of the primary advantages of using Portant is that it enables you to simplify your invoicing process and concentrate on growing your business.

No more manually creating invoices and chasing down clients for unpaid invoices and late payments – Portant takes care of everything for you.

In addition to saving you time, Portant is also very user-friendly. You don’t need special technical skills to use it, and the platform is easy to use and navigate.

So why waste your valuable time on manual invoicing when you can use Portant to automate the process and free up your time to focus on what really matters?

Try Portant today and start streamlining your invoicing process!

FAQs

Q. Which comes first, the receipt or the invoice?

A. Invoices are issued before the client completes the payment, whereas a receipt is issued when the payment is completed.

Q. What are the three types of invoices?

A. The first type is the pro forma invoice, which serves as a customer offer of particular services or goods you want to sell. The second invoice type is an interim invoice that separates a significant payment amount into smaller parts. The final invoice lists the goods or services sold with payment information so your client can complete the payment accordingly. 

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