What is an invoice?
An invoice is a payment request (either electronically or in physical form) issued by the seller after completing the sale of goods/services but before payment. Essentially, invoices are used to make sure your business gets paid. They include information about the transaction, such as details of work completed, payment terms, your company’s unique identification number, invoice date, and total amount due. If you or the business you’re invoicing is VAT registered, you’ll also need to include some additional information on your VAT invoice.
Invoices can be created using invoicing software or drawn by hand, and since timely payments play a key role in healthy cash flow, it’s important to have the invoicing process in place from the start.
How to write an invoice
Writing an invoice is actually fairly simple, but you must include some important elements in every invoice you create. These elements are one of the biggest differences between an invoice and a receipt; an invoice usually contains more information about a transaction and its terms than a receipt. These items include:
your company name, logo and contact information;
the customer’s name and contact details;
unique invoice number;
the date the invoice was created;
Payment due date and any other payment terms;
all acceptable payment methods;
A detailed description of all purchased goods and services, including price and quantity;
The total amount owed, including any taxes.
Since invoices call for payment and record transactions, all of this information is necessary to give customers exactly what they’re being charged for and what you can expect from compensation.
What is a receipt?
A receipt is a proof of transaction provided to a customer after the customer has paid for the goods or services. Receipts typically include information about the goods/services sold, including quantity, price, and discounts, and may also provide details of the payment method used in the transaction. However, it’s important to note that there are no specific legal standards for what’s on a receipt, which means it can actually be a simple handwritten note stating the amount paid.
In brick-and-mortar businesses, receipts are often printed on-site, while e-commerce businesses are more likely to send electronic receipts via email.
How to write a receipt
Creating receipts is even simpler than creating invoices because they are much less detailed. However, they still contain important information about the transaction. They don’t need unique identification numbers or customer information, but every receipt you issue should include:
your company name, logo and contact information;
sale date;
A detailed list of products and services sold;
the price of each product and service sold;
any discounts or coupons;
The total amount paid, including any sales taxes or fees.
Some receipts may also include payment methods, terms of sale, or your organization’s return policy, as this information may be useful to customers if they wish to return or exchange an item. Order errors and returns can have a huge impact on your customers and their business experience; providing as much detail as possible makes it easier for both of you to resolve any issues that may arise.
Difference Between Invoice and Receipt
Invoices and receipts are issued at different stages of the sales process and therefore serve different purposes. Invoices are issued before customers pay, while receipts are issued after payment is received. Invoice as payment request and receipt as proof of payment.
This also means that each file requires different information. Invoices should include details of products and services, while payment receipts only need to show the amount paid and the balance due. Both documents should be clearly marked “”Invoice”” or “”Receipt””.
How are invoices and receipts written differently?
Understanding how invoices and receipts are written and formatted helps highlight their differences.
Formatting invoices:
Invoices include details about both the seller and the buyer. Most follow a standard format with the vendor’s details, such as business name, trading address and phone number, in one of the top corners of the page. The same information is provided for the customer on the opposite side of the page.
Providing invoice numbers at the top of the page makes it easier to identify invoices and payments with your accounting team.
Invoices give specific details on the products or services bought. There should be a name and description along with the rate and the quantity purchased.
There are usually other details like payment terms, discounts for cash or early payment*, the date of the invoice, payment due date, acceptable payment methods, VAT (if you’re VAT registered) and more.
