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.
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.
Cash
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.
Deposit
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.
Hotel
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.
Rent
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.
Simple
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
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.