What Is a Payment Receipt?

A payment receipt also described as a receipt for payment is a documented acknowledgement that payment for a product or service has been received. It is a customer’s proof that the ownership rights of the products bought has been transferred in full or part to them. Typically, this payment receipt would contain important information that gives more clarity on the transaction carried out.

Below, we’ll cover:

What Is a Payment Receipt?
Invoice V.S. Receipt
Why Are Receipts Needed in a Business?
What Is Covered on a Payment Receipt?

What Is a Payment Receipt?

Invoice V.S. Receipt

Invoices and receipts are very useful documents for maintaining business records. They are not only important to the vendors, but to the clients as well.

Since both documents highlight important details like the amount owed and the price to be paid for the exchange of goods and services, it is no surprise that both words are used interchangeably by a lot of people. However, handling them the same way could you land you in some trouble when filing taxes. It is therefore important we draw a distinction between both worlds. But before then let’s note the similarities between an invoice and a receipt.

Similarities between an invoice and a receipt

Both documents are legally recognized
Both are usually issued/handed out by the vendor
Both contain customer and vendor information
Both contain the total amount payable once the complete payment is made at once.

Differences between invoice and receipt

Unlike a receipt, an invoice is issued before payment is made. The former, on the other hand, is issued after payment has been made.
A receipt is a customer proof that he/she has made payment to the vendor while an invoice basically requests that the other party makes payment for the products delivered or the services rendered.
A receipt lists out how much the customer has paid and the payment method used while an invoice just highlights how much is due to be paid to the vendor.
While an invoice keeps track of the goods and services sold, a receipt acknowledges that payment has been made.
For every payment yet to be made after an invoice has been issued, it is to be entered as a credit to sales and a debit under accounts receivable. In the case of an invoice, the customer enters the payment as a debit under any of the expense or asset account and credit under accounts payable.

Invoice Example

Taking a look at this freelancer’s invoice from canva, you can see some telling differences between an invoice and a receipt

This invoice shows at the top a unique invoice number and the issued date. It then includes a short description of the services rendered, number of hours put into the task, the rate per hour and amount subtotal for each service rendered. These subtotals are summed up to give the total amount payable.

At the left bottom corner is the contact information of the client and at the right bottom corner are the payment details of the freelancer.

An invoice may be issued by the accounts department of a company to a client or by a hospital, a repair shop to their customers. In a restaurant setting, the invoice the waiter/waitress brings to the customer may be referred to as a check.

Receipt example

You could get a receipt for payment made through your debit or credit card when you swipe your card through a card machine. You may also get a receipt for groceries bought at a grocery store.

Below is a receipt example showing the seller logo/name, payment method, date payment was made, total number of items bought, amount paid and discount/coupon value.

Why Are Receipts Needed in a Business?

Filling out a receipt of payment is an important part of every business transaction. Hence, it should be treated as an indispensable document from the get-go of every sale. Here are some of the reasons why every business should use receipts.

First and foremost, they may come in handy when a tax audit is to be run on the business’ influx and outflux of cash. In the case of partial payment, they may also serve as a reminder to the customers that they still owe the vendor some cash.

Receipt documentation may also guide businesses in planning their business budget. Based on past expenses, as reflected in receipts, they can plan for the future and develop a robust financial risk management system.

A good habit of keeping receipt records can aid businesses to prepare tax returns, draft their deductible business expenses and make financial projections. Finally, they are necessary if a customer should for any reason need to return an item. Most businesses would usually have a return policy where they state in clear terms the conditions under which a product can be returned or not.

What Is Covered on a Payment Receipt?

There are no rigid rules as to what should be covered on a receipt for payments. But in general a standard payment receipt should contain

A clear header stating that it is a payment receipt
Seller name or logo
Date the payment was received
Amount received
The remaining amount due in the case of a partial payment

FAQs

Can I claim expenses without a receipt?

No, you can’t. This is because for your claims to be valid all deductions you have claimed on your tax return have to be supported for documentation. When it comes to claiming expenses, a bank statement might not be enough evidence to back up your claims.

How can I create an invoice?

Using easy-to-use invoice generators, you can create custom invoices to reflect all the details you want to include.

Are there different types of invoices?

Yes, there are. The most common of them are interim invoice, sales invoice, Pro forma invoice, recurring invoice, past due invoice, and commercial invoice.

Understanding the basic differences between an invoice and a receipt could help you avoid lawsuits, claim allowable expenses and streamline your financial processes properly. Do you need to draft an invoice as soon as possible? WeInvoice has a rich world of templates you can veer off into and select the most suitable for your business needs.