What is the difference between invoice and the receipt?

A business owner comes across various types of documents in his course of business; these documents contain useful information and have different purposes. It becomes mandatory for business owners to know about these documents to avoid any legal hurdles. Two such documents are invoices and receipts; these two documents look similar but serve distinct purposes; at various times, due to a lack of information, business owners consider these two documents alike. In this blog, we will try to discuss invoices and receipts, and by the end of this blog, the reader will be able to understand these two documents in full terms.

What is an invoice 

An invoice is a commercial document; issued by the seller to the purchaser for asking for the payment of the goods or services rendered. The purpose of an invoice is to request money from the client, so it is issued right after the delivery of the goods or services. For making invoices, small businesses can use an invoice management system. 

What is a receipt

A receipt is a document of proof, a receipt signifies that the buyer has completed the payment. A receipt is given by the seller when the buyer completes the payment and the seller receives the payment. A receipt usually contains information on the date of sale and the date of payment.     

What is the difference? 

Now you know the meaning of both documents so, we will try to differentiate them on the following grounds. 

Purpose

The purpose of an invoice is to request payment from the buyer. It gives the buyer an idea of how many goods he has ordered and how much money he owes the seller. Free invoicing software for PC, makes invoicing easy for small businesses. 

The purpose of the receipt is to create legal proof of the payment by the buyer, it recognises the payment by the buyer.  

Details 

An invoice contains details like the firm name of both the parties, invoice number and total amount to be paid by the buyer. A receipt contains similar details to an invoice, but it also contains the total amount paid by the buyer along with the receipt number.

Time

An invoice is issued just after the delivery of the goods or services by the seller, in exceptional cases, invoices are issued before the delivery of the goods to maintain cash flow those invoices are known as interim invoices.

A receipt is issued by the seller when the buyer completes the payment. In this sense, the invoice is issued first and the receipt is issued after the invoice.  

Apart from these differences, there exist some similarities in both the documents i.e., both the documents are issued by the sellers to the buyer, both documents are part of a financial transaction, and both are commercial documents and are non-negotiable. 

Whatever may be the differences or similarities in both the documents, they are both parts of a single business transaction and serves a different purpose and recognises the right and the liability of the seller and buyer.