Invoice or Receipt: What’s the Difference?

When you sell services or goods for your business, you’ll enter an agreement with the client that involves completing a financial transaction. You can have a verbal or written agreement, and you’ll outline the transaction terms or document them with an invoice and a receipt.

Receipts and invoices work as source documents for your accounting purposes, and an invoice is also a bill. You’ll use both of these items to record sales transactions for your business, and they’ll help you account for requests and payment receipts. If you’re wondering if you need to have an invoice or receipt, this is for you. We’ll break down what the differences between the two are, what you use them for, and how to generate both for your business below.

Defining an Invoice

First up, what is an invoice? In short, an invoice is a request for payment or bill for a sale. It’ll list all of the services and goods you provided to the customer as a business, and it’ll also list the credits, prices, taxes, discounts and total due. You can use blank invoice templates to create this document and send it to your client when you complete the transaction.

It’s not uncommon for an invoice to give the client 30 days to pay for your services or products, and many businesses offer a discount if the customer pays within the first 5 to 10 days of the invoice date. The invoice will include all of your relevant contact information for the business, including the address, phone number, web address and email.

You’ll want to include the contact information for your customer with the date of the transaction. It should also include the date you issued the invoice to the client, the services or goods, quantities, prices, invoice number and the total price.

You don’t want to confuse your invoice with a purchase order because a purchase order is a written request from a client to your business that authorises the delivery or shipment of goods with a payment agreement. It’s essential that you understand that an invoice is a legally enforceable document. You can use any invoice you issued to a client for a specific service or good to legally ensure they pay you for it.

Not sure if you need an invoice or receipt? Read on.

Defining a Receipt

On the other hand, you have a receipt. A cash receipt is an acknowledgement from you as a business to your client that states you got the payment they sent for your goods or services. This will act as proof to the customer that they sent the agreed-upon payment. It will also act as proof of ownership if they purchased goods from your business.

A receipt should list pieces of information like the business and client names, prices, discounts, taxes, payment mode, receipt number, date of payment, the total amount payable and the business owner’s signature. The receipt acts as a legal document too.

However, it won’t always list the quantities of goods the client purchased, nor does it always outline what the client purchased. This is where your invoice comes back into play because it lists the services or items involved in the transaction. If the receipt has this list, you won’t have to worry about sending out a separate invoice.

Invoice or receipt explanation and definition

Using Invoices or Receipts

Your invoice functions to keep track of the sales for your business, request payments from your clients, help control your inventory, and facilitate the delivery of services or goods. You can also use invoices to track expected future cash flow or manage your relationships with your customers by offering different payment options. These options include things like extended payment periods or discounts if they pay in cash or pay early for your goods or services.

Customers or buyers use receipts to prove they paid for goods. This is especially important when they want to return an item that is defective or faulty. Since the receipt will have the transaction date and item on it, you can easily see if they did, in fact, purchase an item that doesn’t work as it should.

Unfortunately, people use invoice or receipt interchangeably a lot, and this makes a lot of people assume that there isn’t a difference between the two items. However, you know as a business owner that the two things are very different. Some people find this out the hard way when they try to settle all of their accounts for their business. Other people don’t realise the difference until they go to file taxes and find themselves in the middle of a paperwork nightmare.

Needless to say, it’s a very big risk to not understand the key differences between the two items. You understand that both documents are important for accounting purposes, and both will come into play when you involve a client and your business in a transaction for services or goods for payment.

Both receipts and invoices work to record the amounts owed and paid for in regards to the outlined services or goods. Both function as legal documents. As you can see, there are a lot of similarities between the two items, and this can lead to confusion. However, there are key differences you want to consider, and this can help alleviate the confusion.

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Similarities and Differences Between Receipts and Invoices

The similarities between the two documents are what confuses a lot of people, and you can even get sample invoice templates that people mistake for receipts. The biggest similarities between the two are:

  • Both contain client and business contact information
  • Both function as legal documents
  • Both list the total payment amount if the client makes the payment in full
  • Businesses issue both

On the other end of the spectrum, you have the differences between receipts and invoices. Once you learn these things, it gets much easier to know which is which when you talk about them. The biggest differences include:

  • Invoices function as a request for the client to make a payment while a receipt is proof that the client paid the bill.
  • You issue an invoice before the client makes the payment, and you issue a receipt after you get the payment.
  • The invoice will list out the total amount of money owed by the client, and the receipt lists what the payment mode is and how much the client paid.
  • A business can issue an invoice without the customer making a payment, and you’ll enter the payment on the invoice as a Debit and a Credit to Sales under Accounts Receivable.
  • If the client gets an invoice but doesn’t make a payment right away, the client will add the payment as a Credit under Accounts Payable or a Debit under an asset account or an expense account.
  • Businesses use invoices to track services or goods sold while they use receipts to acknowledge that the client has made a payment.

Who Issues Invoices?

Generally speaking, a seller, vendor, trader or merchant usually create an invoice using a template and issue it. Your accounts department can also issue invoices, and services like mechanics, hospitals, doctor’s offices or repair shops can also send invoices to their customers.

If you choose to go out to a restaurant or bar and order drinks and food, the waitstaff will bring you an invoice when you get ready to leave. This invoice is another name for the check, and it outlines everything you had that evening and have to pay for.

Who Issues Receipts?

Just like invoices, sellers, vendors, merchants, and traders can issue receipts. However, you can issue these receipts to your client or a third party to acknowledge that you got the payment for your goods or services. The client will typically get a receipt from a credit card machine if they swipe their card when they pay for your goods or services if they choose to pay by credit or debit.

Sometimes, you could stamp an invoice as “paid” if you don’t want to issue a separate receipt. This is very common in a restaurant, supermarket or grocery store where the invoice will turn into the receipt once it has the paid stamp on it.

Similarities and differences between invoices and receipts

How to Make Receipts

You can make receipts using Word invoice templates, but this can be very time-consuming if you have dozens of clients to worry about on a daily basis. Since you use both receipts and invoices for accounting purposes, it’s essential that you keep good records for your business. Billdu allows you to quickly and easily create receipts that are professional-grade, and you can automatically fill in any relevant information you need, depending on the transaction.

Essential Receipt Components

Since receipts are so important to your business, make sure to understand what the essential components are to this document. These components should be on every receipt you issue to your clients because they serve as proof of payment. You should include:

  • Address and name of the client making the payment
  • Address and name of the person or business receiving the payment
  • Amount paid
  • Date the client made the payment
  • Initials or signature of the person who got the payment
  • Payment method (credit card, bank transfer, cash, etc.)
  • Reason for the payment (goods or services)
  • Receipt number for tracking purposes

Common Types of Receipts

When a client makes a large purchase or you have a transaction that involves money, it’s wise to have a receipt. This will show a record of where the client gave their money, when they gave it, and for what. It’ll help you as a business owner later down the line if the customer asks for a return, refund, or exchange for their goods. As a business owner, you’re responsible for giving the receipt to your client. Common types of receipts include:

Blank Template

You can create your own receipts using a blank template. It’ll have the same basic components as most receipts, including both parties, how the client paid, how much they paid, and more. You can also customise a blank template to include whatever information you deem important, and you can personalise them to include your logo.


A cash receipt is one you’ll use at the end of a sale. It pulls the information from the sale and acts as proof of purchase. It usually includes your business’s address and name, the client’s name and address, sale date, description of what you sold, and the amount the client paid. It could also include how the client paid, such as through credit or debit card.


This receipt keeps a total on how much a person put into an account or put as a down payment on a vehicle, property or item to pay out. It’ll list the name and address of both parties, the type of deposit it was, how much the client paid, the date and the person who got the deposit should sign or initial it.

Donation or Thank You

When a client makes a donation, you should give them a thank you letter or receipt. This is because the client could get a tax break, depending on the amount they donate. You should include the name of the organisation that got the donation, the donor’s name, the amount donated and when you got the donation. It can show the client how you’ll use their money. For example, maybe you could use it to get instruments in an inner city school so they can have a music program.


This type of receipt shows how much someone pays to stay in a hotel room. It’s very important because staying in a hotel could entitle the person to a tax writeoff, or they could take it to their employer for reimbursement. This receipt should have the guest’s contact address and name, the hotel’s name and address, the date issued, name of the employee issuing the receipt, stay length, how the client made the payment, and how much the room was.

Packing Slip

While this isn’t strictly a receipt, it can have a lot of the same required elements while acting as proof of ownership or purchase. One of the biggest differences between a packing slip and a receipt is that you’ll label it “Packing Slip.” You’ll include the purchase date, business name and address, client name and address, the items in the shipment, the quantity of the items, item price and the total price paid by the client. You could also see this classified as a delivery note or receipt.


Your rent receipt will have the name of the person paying, amount of rent, property address, how they paid and the payment date. The person’s agent or landlord should sign it, and both the renter and the landlord should have a copy.


This simple template is popular for when you can’t find an example of the receipt type you need to properly document a sale. You want to include the sale date, receipt number, amount paid, name of the person paying, payment reason and how the client paid you. If the payment was for a specific time period, you want the receipt to reflect the dates it covers. If it’s an installment payment, you want to have the amount received with the balance after you apply the payment. You’ll sign the receipt as the business owner, and it’s better known as a sales receipt template.


Taxi drivers will issue this type of receipt. This receipt will prove how much you paid as a passenger, when you rode in the taxi and how far you went. This is another important receipt to get because you could write it off on your taxes or ask your employer to reimburse you.

Try Billdu to Create Invoices and Receipts

Billdu gives you all of the tools and software you need to create both invoices and receipts. You can easily customise your invoices or receipts to match your specific situation. You’re able to add your logo, business information and client information before sending it off electronically. The client can then download and save it for their records. We offer a completely free trial that you can use to see how to make receipts and invoices and streamline your business’s finances.

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