Invoice vs. Receipt: What's the Difference?

Whether or not you’ve been paid will help you decide which to use

Female mechanic showing receipt to customer with credit card
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Invoices and receipts are electronic or paper documents used to track purchases. While they are often used interchangeably in casual settings, the two terms hold different meanings in a business context.

In essence, invoices are used to request payment, while receipts are used to demonstrate proof of sale and payment.

For instance, if you are a consultant, you may use an invoice to request payment for your time and services. On the other hand, if you are a small business owner selling homemade products, you provide receipts to the buyer as proof of payment.

What’s the Difference Between Invoices and Receipts?

Understanding the differences between an invoice and a receipt can help you improve the efficiency of your transactions. Here are some key differences to keep in mind:

Invoice Receipt 
Due Date Invoices are due in 30, 60, or 90 days based on the nature of the agreement Receipts are proof of payment already done, so no due date is needed
Used By Contractors, freelancers, and employees  Sellers and business owners 
Includes Business information
Customer contact information
Product or service description
Amount of money owed
Deadline for payment
Method and terms of payment
Goods purchased
Price of items bought
Amount of money paid to the seller
Date of the transaction
Business information
Business contact details

Due Date

Companies, businesses, and recruiters who are hiring contractors to provide services typically agree on a deadline for payment. Net 30 and Net 60 are common due dates for invoices, meaning the contractor is paid within 30 or 60 days, respectively, of receiving the invoice.

If you are a seasoned contractor with established client or customer relationships, you may consider requesting advance payments (payments upfront) in an invoice sent before the work is complete—or before it has even commenced.

Receipts, meanwhile, don’t have such due dates, as they represent an already completed transaction.

Who Uses It?

Contractors and employees use invoices to request payment from the company or individuals they work for.

Salespeople and business owners use receipts as official proof of a transaction between the seller (or business owner) and the buyer (or client).

What Do Invoices and Receipts Include? 

An invoice includes more specific details than a receipt, including:

  • The business’s name and contact information
  • The customer’s name and contact information
  • A unique business ID, such as an employer identification number (EIN)
  • An invoice number
  • The goods sold or services provided
  • The amount owed
  • The payment deadline
  • The method of payment to be used

To avoid delayed payments and disputes, you should include late fees and processing fees in your invoice’s terms of payment.

A receipt, on the other hand, includes:

  • The business’s or seller’s name and its contact information
  • The date of purchase
  • An itemized list of the goods sold or services provided
  • The price of those goods or services
  • The total amount sold including sales tax and fees

A Best-Of-Both-Worlds Option

While an invoice and a receipt separately fulfill different functions to keep a business operational, they can (and often are) used together for a comprehensive transaction process.

For instance, many businesses hire contractors to provide services like sales, marketing, design, and labor. These contractors, in turn, invoice the business for the work done. The same business also issues receipts to customers when they buy something from the shop.

Though they serve different purposes, invoices and receipts can be used in complement to create an organized record of transactions. Creating a system to maintain these expense records can help when filing taxes, solving customer complaints, and aiding in legal disputes. 

While the terms “invoices” and “receipts” may be used interchangeably in a casual conversation, they shouldn’t be substituted for each other in formal business practices.

Invoice vs. Receipt: Which One Is Right for Me?

As a business owner or a seller, you don’t have to settle on using either an invoice or a receipt. You can incorporate both in your process to maintain accurate records and simplify transactions, whether you’re requesting money for a service provided, confirming a payment, or verifying a transaction.

Frequently Asked Questions (FAQs)

What is a pro forma invoice?

A pro forma invoice provides an estimate of what a project or service would cost. It is sent before the work is complete. A pro forma invoice does not contain the invoice number and can’t be considered a legal or official invoice.

How do you write an invoice?

You can write an invoice by including the business’s and customer’s basic information, including both of their contact details, an invoice number, the nature of work, terms of the transaction (money owed, payment date, etc.), and payment (Net 30, etc.). You can find dozens of free invoice templates online to help you get started.

What is a receipt book and how do you fill one out?

A receipt book is a set of forms combined in a booklet to be used as receipts. Businesses use these to record payments for themselves and provide a copy to customers. Receipt books can be filled manually (pen and paper) or via online apps and software.