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Invoice vs. receipt: what’s the difference?

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Last editedSep 20202 min read

Invoices and receipts may seem like similar things – after all, they’re both related to payments – but as a business owner, there are a couple of crucial distinctions that you need to understand. Learn more about invoices vs. receipts with our comprehensive guide. First off, let’s take a look at the definition of an invoice in a little more detail, before exploring the most important differences between receipts and invoices.

What is an invoice?

An invoice is a demand for payment (delivered either electronically or physically) that’s sent by the seller after the sale of goods/services has been completed, but before payment has been made. In essence, invoices are used to ensure that your business gets paid. They include information about the transaction, such as details of the work that’s been completed, payment terms, your company’s unique identification number, the date of the invoice, and the total amount due. If you or the business you’re invoicing is registered for VAT, you’ll also need to include some additional information in a VAT invoice.

Invoices can be created using invoicing software or drawn up by hand, and since prompt payment plays a key role in healthy cash flow, it’s important to get the invoicing process right from the get-go.

Is an invoice proof of purchase?

Although invoices may be used as proof of having requested goods or services, or as proof of an outstanding formal agreement between a buyer and a seller, they do not provide proof that a service has actually been paid for. In fact, unpaid invoices are a significant problem, and many SMEs throughout the UK experience issues with late payments. So, is an invoice proof of purchase? No, it isn’t, and that’s one of the key points to bear in mind when thinking about sales receipts vs. invoices.

What is a receipt?

A receipt is a proof of transaction which is provided to customers after they’ve paid for goods or services. Receipts usually include information about the goods/services that were sold, including quantity, price, and discounts, while they may also provide details of the payment method used in the transaction. However, it’s important to note that there’s no specific legal standard for what to include on a receipt, which means that it could literally be a simple, handwritten note stating the amount that has been paid.

In brick-and-mortar businesses, receipts are usually printed on the spot, while e-commerce businesses are much more likely to send electronic receipts via email.

What’s the difference between an invoice and a receipt?

As you can see, there are several clear differences between invoices and receipts. When it comes to sales receipts vs. invoices, the most important distinction revolves around the purpose of these documents. Whereas invoices are a request for payment, a receipt is proof of payment. It’s also important to remember that you’re legally required to include much more information on an invoice than you are on a receipt.

So, while invoices and receipts are both related to the payments process, they are very different documents that have very different uses.

What is a “paid invoice” called?

After an invoice has been paid, it is usually referred to as “settled,” the same way that one would settle a bill. However, it may simply be referred to as a “paid invoice.” In this sense, a settled invoice occupies a similar role as a receipt, as it provides confirmation that payment was received for goods and services. Because most receipts are relatively basic, it’s best to keep both the receipt and the settled invoice.

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Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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