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What is the difference between invoice and receipt?

As a business owner, it’s essential to be up-to-date with the entire sales process. That will help you run your business in compliance with all legal requirements, manage finances precisely, and track the revenues your business is owed or has received. 

One crucial thing to do is manage and monitor your sales invoices and payment receipts.   They are both crucial for your business, whether you deal with large or small business accounting.  

In this regard, below, we will discuss the difference between an invoice and a receipt.

What are invoices?

An invoice is a document issued by a business to a customer to request payment for purchased or received products or services. It is a formal claim for payment from the customer and proof that the sale has been made in front of authorities. 

As an official document, every invoice issued by your business for collecting payment must follow a specific format. 

While you can customise the visual aspects of your invoices, all documents must include the following components: 

  • Invoice date;
  • Invoice number; 
  • Your business name; 
  • Your business logo;
  • Your business contact information;
  • The customer’s name;
  • The customer’s contact information;
  • The payment due date;
  • Payment terms and all acceptable payment options  – in most cases, these include some of the most popular payment methods in the UK, including bank transfers, debit and credit card payments, and more. The acceptable payment options should be synchronised with your payment service provider;
  • A full description of all purchased or requested goods or services;
  • The total amount the customer owes to the business, with any taxes and fees added.

To create invoices, you can use an invoice template or customize your template from a sample invoice that you can find online. Alternatively, you can also use invoicing software to manage your invoices. 

It’s essential to remember that the invoice is used to request payment. You must send it to the customer before the payment but after the products or services have been delivered or provided. 

Invoices are not obligatory in every industry nor a mandatory part of every sales transaction. They can’t act as payment confirmations and aren’t enough to record sales as income for accounting purposes.

Are all invoices the same?

Not all invoices are created in the same way.

There are a few types of invoices that business owners should be aware of the following:

  • Pro forma invoice – an initial invoice that offers a general overview of the costs associated with the goods or services that will be provided; 
  • Interim invoice – an invoice that is used to request a partial payment;
  • Final invoice – invoices requesting payment in full;
  • Debit invoices – a document that shows that there are additional costs associated with an original invoice;
  • Credit invoices – a partial or full credit related to an already issued invoice;
  • Recurring invoices – automatically generated invoices sent to customers on a regular basis with previously agreed-upon prices.

The above-mentioned types are some of the most popular types of payment documents. There are other invoices, such as commercial ones, which are also frequently used.

What are receipts?

What are receipts?

While an invoice requests that customers pay, a receipt is a slightly different document. 

Despite the common misconception that invoices and receipts are the same, sales receipts are proof of payment

Payment receipts verify that the customer has paid for the received products or services. Unlike invoices, not all businesses must issue receipts for every transaction.

However, they’ve become quite popular in the UK and other parts of the world, making them a common practice in today’s business world. One reason is that businesses can only make a tax return claim that can help save money through receipts. 

All business expenses accumulated and claimed as deductions on your tax return must be backed up by official documentation, such as receipts. 

Moreover, self-employed individuals who submit self-assessment tax return documents to the HMRC must provide details on self-employed invoices and receipts. 

Depending on your business type and your customers’ preferred sales channels, you can issue both physical and electronic receipts

For example, brick and mortar businesses usually ask for printed or written receipts that are provided instantly after completing the payment. On the other hand, most e-commerce businesses prefer to offer electronic receipts via email for convenience and ease of use. 

Electronic receipts are also a great choice for businesses that pay close attention to their impact on the environment. 

For example, 84% of stores in the UK offer digital receipts, while 60% offer customers the option of paper and digital receipts. 

A receipt serves as official proof of payment and must follow a specific structure. Due to their simplicity, receipts are much easier to create than invoices, but they can take some time to structure. 

Unlike invoices, receipts don’t need to feature a receipt number or any information related to the customer. 

Instead, receipts should include:

  • Business details (name, logo, contact information);
  • Original sales invoice number (if any);
  • List of sold products or services;
  • Payment date;
  • The payment amount of each sold product or service;
  • Any applicable discounts or coupons;
  • The total amount that has been paid (with any tax or fees included);
  • Any remaining balance. 

You may include the customer’s payment method on your receipts, but this is not obligatory. Furthermore, you can customise these documents further with details on your company’s return policy. That is information that will be helpful to your shoppers.

While receipts are non-mandatory, they’re very important for businesses of any size. 

They’re essential for customers who need to return or exchange a product. In this case, the receipt is the only way to confirm and verify the shopper’s claims.

What is the difference between an invoice and a receipt?

The critical differences between invoices and receipts are their purpose and document structure.

While a receipt proves that a payment had been made for the purchased goods or services, an invoice enables businesses to collect invoice payments due for requested or received products or services. In addition, invoices inform customers of the deadline to submit payment. 

Regarding structure, invoices are considered more complex and detailed than receipts. 

However, invoicing software or ready-made templates will help you save time and other resources.

Can you use an invoice as a receipt?

Invoices and receipts are two completely different types of documents related to the sales process, so it’s not recommended to use them interchangeably. 

As noted above, an invoice cannot act as proof of payment. It only serves the purpose of requesting payment

However, sometimes, businesses can send a paid invoice instead of a receipt. In this case, the remaining balance due on the invoice must be 0.

When should you issue an invoice to your customers, and how?

When should you issue an invoice to your customers, and how?

Based on the specific aspects of your industry and business structure, you may be legally required to issue an invoice or a receipt. 

However, in some cases, issuing both an invoice and a receipt is mandatory. 

In the UK, the only case where invoices are obligatory is when both your business and the customer are VAT-registered

At the same time, it’s worth noting that most companies choose to issue invoices when working with B2B (business-to-business) clients, even if they are not registered for VAT.

The reason behind this practice is that it ensures accurate records of their income for tax reasons.

On the other hand, receipts are mandatory whenever a customer purchases and completes a payment. 

If your customers pay for the provided goods or services immediately, there’s no need to issue an invoice. You can only offer a sales receipt that will act as proof of payment

This is a beneficial practice both for the business and the client. On the one hand, it’s a method that can improve customer satisfaction and guarantee that your shoppers have made the correct payments for the products or services purchased. 

On the other hand, it allows the business to be aware of the payments that have been successfully made. 

When it comes to invoices, you must issue them after the customer has requested goods or services from your business and they’ve been delivered. The invoice should be sent out to the customer to collect payment.

The standard method is to send invoices to customers via the customer’s email or fax. However, you can also take advantage of invoice links and electronic invoices. For businesses that choose to send invoice payment links, the issued receipt after the customer pays will usually include the initial invoice number.


Large and small business owners must understand invoice vs. receipt, as it’s crucial to secure accurate accounts and efficiently manage cash flows. 

As we uncovered in the sections above, invoices and receipts are also crucial for tax purposes. They help businesses to determine due taxes and identify tax returns. 

Frequently Asked Questions

No, invoices don’t act as proof of purchase. They only demonstrate that a customer has requested products or services or can act as a document indicating an outstanding formal agreement between a buyer and seller.

Invoices are essential as they demonstrate that the customer has requested goods or services. They also describe the terms of the sale, request the payment, and serve as official financial records for the business and the customer.

No, the payment date is specified on each invoice. Some may require an immediate payment, while others may allow payment in the next week, month, or other agreed time frame.

Receipts are documents proving that a customer has paid for a provided product or service.

No, receipts and invoices have specific structures that businesses must consider. Invoices are more detailed and complex documents than receipts. Some of the details included in receipts and invoices overlap; however, more data is present on invoices.

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