Handbook / Invoicing and getting paid

Invoice vs receipt: what's the difference and when to send each

Invoices and receipts are both records of a sale, and people often use the words interchangeably. But they do different jobs at different times. Getting them right makes it easier to get paid, keeps clients happy and gives you the records you need for tax.

The short answer

• Invoice: a request for payment. Sent before payment.
• Receipt: proof of payment. Issued after payment.

What an invoice includes

An invoice tells the client what they owe and how to pay. It usually includes:

• your business name and contact details
• the client's name and details
• a unique invoice number and date
• a description of the work or goods, with quantities and prices
• taxes, if applicable
• total due
• due date and payment terms
• accepted payment methods

See how to invoice for a full guide.

What a receipt includes

A receipt confirms the transaction is complete. It usually includes:

• your business name and contact details
• receipt number or the related invoice number
• date of payment
• what was paid for
• amount paid and any tax
• payment method, such as card, bank transfer or cash
• remaining balance, if it was a partial payment

When to send each

Invoice first, receipt later. For most service work, you send an invoice after delivering the work or at an agreed stage, and send a receipt once the client pays.

Receipt only. For immediate sales, such as at a market or when a customer pays upfront at the time of service, you may skip the invoice and give only a receipt.

Invoice and partial receipts. For deposits and progress billing, you may issue several invoices and receipts for one project, each showing what has been paid and what remains.

Paid invoices as receipts

Many invoicing tools let you mark an invoice as paid and send it to the client with the payment date and method. That paid invoice can serve as a receipt. Card and online payment processors often send automatic receipts too; check what yours does so clients do not get confusing duplicates.

Why both matter for your records

The IRS explains that you should keep records that support your income and expenses, and that supporting documents for sales include items such as cash register tapes, deposit information, receipt books and invoices. Your invoices show what you billed; payment records and receipts show what you actually received. Matching them helps you:

• see which invoices are unpaid
• reconcile your bank account; see reconcile a bank statement
• report income accurately
• answer questions if the IRS ever asks

Your own receipts

When you buy things for your business, keep the receipts you receive. The IRS says supporting documents for expenses should identify the payee, the amount paid, proof of payment, the date and a description showing the expense was for business. A system for storing them is covered in receipt tracking.

How long to keep them

The IRS explains that retention periods depend on your situation, with three years from filing as the basic period and longer periods in some cases. See how long to keep records. Store invoices and receipts digitally with backups; see data backup.

Common mistakes

• calling a request for payment a receipt, which confuses clients
• sending invoices without a due date or payment methods
• not linking receipts to invoice numbers
• losing receipts for business expenses
• relying on bank statements alone, which may not show what a payment was for

Templates and tools

Accounting and invoicing software can create both documents from the same record, numbering them consistently and tracking payment status. If you use simple templates, keep a log linking each invoice to its payment and receipt.

Partial payments

When a client pays part of an invoice, send a receipt for the amount received and show the remaining balance. Keep the invoice open until it is fully paid, and record each payment against it in your books. This avoids confusion over what is still owed, especially on long projects with several invoices.

Refunds and credits

If you refund a client or issue a credit, document it with a credit note or refund receipt that references the original invoice. Record it in your books so your income figures stay accurate. A clear paper trail helps both you and the client reconcile their accounts.

Sales tax on invoices and receipts

If you collect sales tax, show it separately on both invoices and receipts, as your state requires. Keep records of tax collected so you can file accurate returns; see sales tax permit.

An invoice asks for payment and a receipt proves it was made; send invoices with clear terms, confirm payments with receipts or paid invoices, link them by number and keep both, along with your own purchase receipts, for tax.