An invoice, a bill, and a receipt – these are probably all documents you’ve heard about but you might not be aware of the subtle differences that make them exactly what they are. So, let’s take a look at each one so you can be clear about what documents to refer to when you need to and learn the difference between an invoice, a bill and a receipt. Have a look atour invoice definition before reading this article if youneed to learn what is an invoice before reading this.
Definitions
Invoice
An invoice is an itemized list of products sold or services provided, along with the amount of money owed for each line item, and the total amount of money owed. An invoice is sent from the biller to the client, in hopes of being paid within a certain amount of time.
Bill
A bill is something you, as a customer must pay. A bill is an invoice in that it has the itemized list of products sold or services provided, along with the amount of money owed for each item, and a total amount owed. However, when you receive an invoice, you would enter it as a bill that you owe. In other words, an invoice is sent, and a bill is received.
Receipt
A receipt is different from an invoice in that an invoice is requesting payment for products or services received, whereas a receipt is proof that the services or products have already been paid for. An invoice comes before the payment has been made, while a receipt comes after the payment has been made.
Differences
So, if you are a vendor, you would send an invoice after a service has been completed and money is owed, and then you would send a receipt after you receive the payment from the invoice. On the other hand, if you are a customer, the invoice you receive is your bill, and then you will receive a receipt once you pay your bill.
Invoice is sent → Customer receives it as a bill → Payment is made → Receipt
The importance of an invoice and a bill is that it documents the services completed and/or products sold, along the with the amount owed. The vendor and the customer can use the invoice for bookkeeping purposes.
The importance of a receipt is that it serves as documentation that the products and/or services has been paid for and the business transaction is complete. The vendor and the customer can use the receipt as proof that the amount owed has been paid.
Please note that there are several different types of invoices, each for different types of services, products, and payment agreements made between the vendor and his client.
If you are handwriting your receipts, you can speed up the process by investing in carbon copy paper. This will provide two copies of the receipt: one for the vendor and one for the customer. Also, make sure you use very dark ink for handwritten receipts.
Make sure each receipt you create, or receive, includes vendor and vendee details, product or service details, the date of the transaction, the amount of the transaction, the method of payment, and signatures from the vendor and the client.
If you have to create several different receipts as a part of your business, you can always create a customized template, or there are several free receipt templates you can download online. Having a template will speed up the process, and it will ensure all of your receipts look uniform and professional.
Once you get the hang of it, invoices, bills, and receipts will become second nature to you; and they will help keep your business finances in line and organized.
FAQs
An invoice is not a receipt and the key difference between the two is that an invoice is issued before payment as a way of requesting compensation for goods or services, while receipts are issued after payment as proof of the transaction. An invoice tracks the sale of a business's goods or services.
What is the difference between a receipt invoice and a bill? ›
Conclusion: In conclusion, invoices, bills, and receipts each play a unique role in the realm of financial transactions. An invoice is a detailed request for payment, a bill is a simplified version of an invoice, and a receipt serves as proof of payment.
What is the difference between a bill and a receipt in QuickBooks? ›
Payment information they contain: Invoices contain information about a future payment, including how to pay for it and due dates. Receipts contain information about a completed payment, including the date and amount paid. How they're used in accounting: Receipts record a completed sale, so you'll record them as income.
What is the difference between invoice and bill in QBO? ›
Intuit QuickBooks classifies bills and invoices in very distinct ways. According to this accounting software giant, an invoice includes the money your customers owe you, while a bill refers to the money you owe your creditors. In other words, an invoice and a bill are classified as income and expenses, respectively.
What does it mean when an invoice says bill to? ›
Bill to on Invoice refers to the party responsible for payment as indicated on the invoice. It includes the name, address and contact details of the entity that is charged for goods or services. The document about Bill to on Invoice is crucial in invoicing as it indicates who is responsible for payment.
Is an invoice basically a receipt? ›
The difference lies in when they are issued and how they are used for accounting purposes. While an invoice is raised to get payment from the customer, a receipt is issued after receiving the payment from the customer. Typically, a receipt is issued only after the customer pays in full.
Can a receipt look like an invoice? ›
The invoice should include a detailed breakdown of the products and services, whereas the payment receipt only needs to show the amount paid and any balance due. Both documents should be clearly labelled as “Invoice” or “Receipt”.
Can an invoice and a receipt be combined? ›
Most companies use a combination of receipts and invoices to record transactions for themselves and their customers, and it's likely that you'll have to do the same. Although these two documents have similar functions, they are incredibly different from each other.
Does QuickBooks send a receipt when an invoice is paid? ›
As of now, QuickBooks Online doesn't have the option to send a receipt or notification to the customer after making a payment. As a workaround, I recommend sending them a Balance Forward statement to give your customers their complete transaction history. I'll show you how: Go to Get paid & pay and select Customers.
Is a bill a check or receipt? ›
The word check is generally used in American English and, as the word bill, it is a piece of paper that shows how much we need to pay in a restaurant or a café: I would like a check for the whole table. A receipt is basically a piece of paper that is given when we pay for some product or service.
While invoices and receipts have some similarities, they are used at different stages of the sales process and document different information. The main difference is that invoices are issued before a business has received payment from a customer, and a receipt is issued after payment has been collected.
What is the difference between a bill invoice and a statement? ›
A statement is a document outlining all outstanding unpaid invoices (or bills) for a certain customer. Unlike invoices, statements are typically sent or made available at certain intervals. For example, many businesses send statements at the end of each month or quarter to individuals who have an outstanding balance.
What is the difference between an invoice and a sales receipt Quizlet? ›
An invoice is for sales that will be paid in the future; a sales receipt is for sales that are paid at the time of sale. An invoice records the sale; a sales receipt records the payment.
What is the difference between an invoice and a bill? ›
Bills provide limited details such as prices and VAT, invoices provide detailed information and are therefore legally binding. Bills are commonly used to pay for goods and services received instantaneously, invoices can be used for immediate transactions, but are also used to request payment before a pre-approved date.
What is the difference between a bill and a receipt? ›
A receipt is different from Billing slip/invoice and a bill that asks the customer to pay for the goods or services received. The receipt is a document/evidence that the service or product has been paid for. Therefore, the invoice (Invoice) or bill (Bill) comes before the payment.
What is the purpose of invoice bill? ›
The primary purpose of an invoice is to formalize the agreement between the seller and the buyer regarding the sale of goods or services. Invoices serve several essential functions: Request for Payment: An invoice is a formal request for payment, specifying the amount due and the due date.
What comes first invoice or receipt? ›
An invoice is not a receipt and the key difference between the two is that an invoice is issued before payment as a way of requesting compensation for goods or services, while receipts are issued after payment as proof of the transaction.
Is the receipt valid as invoice? ›
There's a difference between receipts and tax invoices. A receipt is a document that shows proof of purchase and allows you to return damaged or faulty goods to the business selling it. A tax invoice is a document shows the price of a purchase, as well as whether GST was collected.
Can I use an invoice as proof of payment? ›
Is an invoice proof of purchase? Although invoices may be used as proof of having requested goods or services, or as proof of an outstanding formal agreement between a buyer and a seller, they do not provide proof that a service has actually been paid for.
Are invoices legally binding? ›
An invoice is not a legally binding agreement—but it does serve as a record of a transaction. It's evidence a product was delivered or a service was rendered and an amount is due in return.
