Building Your Business

Invoice vs. Receipt: What's the Difference?

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

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Updated on November 28, 2021

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Female mechanic showing receipt to customer with credit card — Photo:
Maskot / Getty Images

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.

Note

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

Note

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.

Note

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.

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

Gov.uk. "Invoicing and Taking Payment From Customers."
International Trade Administration. "Pro Forma Invoice."