Invoice vs receipt: what's the difference?

They look similar, but they do opposite jobs. An invoice requests payment; a receipt confirms payment was made.

The invoice

You send an invoice before you've been paid. It states what's owed, the due date and how to pay. It's a request and a record of the amount due.

For VAT, the invoice is the document that counts. Under the EU VAT Directive, a business customer must hold a proper invoice to deduct the VAT it paid (article 178), and article 226 lists what that invoice has to show. In the UK, gov.uk says you must use VAT invoices if you and your customer are both VAT-registered, and you normally have to issue one within 30 days of the supply (VAT Notice 700/21, section 3.1).

The receipt

You issue a receipt after payment lands. It proves the transaction is complete and is what a customer keeps for their own records or expense claims.

A useful receipt shows the date you were paid, the amount, the payment method and the invoice number it settles. Give receipts their own numbers too, so that when one payment clears several invoices, anyone reading your books can match them up.

When one document does both

For small sales, a detailed receipt can double as the invoice. The VAT Directive requires EU countries to allow a simplified invoice where the amount is not higher than €100 (article 220a, inserted by Directive 2010/45/EU). In the UK, a business that isn't a retailer can issue a simplified VAT invoice for supplies of £250 or less including VAT, showing its name, address and VAT number, the time of supply, a description, and the total with the VAT rate (VAT Notice 700/21, section 4.5). Check your own country's rules before relying on this.

Keep both

Invoices and receipts are the evidence behind your accounts. The IRS lists invoices, receipt books and credit card receipts among the supporting documents a business should keep, and its general rule is to keep records for 3 years, longer in some situations. In the UK, you must keep your records for VAT purposes for at least 6 years (VAT Notice 700/21, section 2.4). Other countries set their own periods.

Related documents

• Proforma invoice — a preliminary bill sent before the work, not a demand for payment.
• Credit note — cancels or reduces an invoice you've already issued.
• Remittance advice — the customer's note saying which invoices a payment covers.

Which do you need?

If you're asking to be paid, send an invoice. If you're confirming money received, issue a receipt. A simple routine is to send an invoice, then mark it paid and confirm by email once the money arrives. In Invoice Forever you can mark an invoice as paid to keep your records straight, and export a year's invoices as a CSV for your accountant.