Whether you’re a small business owner or a big-time entrepreneur, it’s always important to document all of your business-related transactions. Without a comprehensive record of all your purchases, returns, or exchanges, it’s near impossible to maintain a sound financial balance. At the same time, you will also have a hard time handling your taxes and monitor your company’s performance. Your customers will find relevance in the documentation of their respective transactions. Not only will it be relevant to their financial records, but it will also be useful if they have an issue with their order.
To achieve exponential growth, business owners need to identify the best record-keeping method for their organization. The majority of companies use both invoices and receipts to track and record transactions for themselves and their customers. If you haven’t incorporated both of these documentation options, it’s about time you do. While having similar functions, both invoices and receipts are completely different from each other. To keep your business running smoothly, it’s essential to know how these two documents will differ and how they relate to each other. In addition, you also need to know what information to include in each document and when to use them for your valued customers.
What is an Invoice?
An invoice is a billing document that requests payment for products or services provided. The seller usually sends this document to the customer. However, there are some instances where it’s the other way around, especially when a customer asks for reimbursement.
Like a standard bill, an invoice lists what products or services were provided, their corresponding price, and the forms of payment the seller accepts. An invoice is sent to the customer after the goods and services are received. However, it should be sent before you receive payment. An invoice is an official document that asks for payment, after all. Having it sent when you’ve already received payment will defeat its purpose.
An invoice is a standard document among large companies that sell in large quantities. Manufacturers, and wholesalers, in particular, find value in using an invoice. Even smaller, freelance workers like content creators or graphic designers use an invoice to bill their clients for their work. Essentially, any business, regardless of what services they offer or products they sell, can make good use of invoices. It serves as a practical document for billing customers after a sale.
Traditional invoices are printed on a piece of paper and sent to the customer via mail or fax. But nowadays, most invoices are sent digitally. Electronic invoices, or e-invoices, are the best option for traditional and e-commerce businesses since everything is done online. Using a comprehensive invoicing platform like ReliaBills can simplify the entire invoicing process for any business. Whether you’re a traditional business or e-commerce that does business exclusively online, an e-invoice is the best option for invoicing.
However, whether it’s written or electronic, you must pay close attention to your invoices. This document will help you get paid quickly and on time for your goods or services. Make sure you include all the necessary details in your invoice to guarantee that you’re getting paid for all of the goods or services you provided.
How to Write an Invoice
Writing an invoice is as simple as writing down the goods or services you provided on a piece of paper along with their corresponding costs. However, there are a few important elements that you will have to include in any invoice that you send to your clients.
These elements are the difference-makers that separate an invoice from a receipt. An important aspect of an invoice is that it contains a lot more information than a receipt. Items that belong to an invoice include the following:
- Your business name, company logo, and contact information.
- The customer’s name and contact information.
- The invoice number (NOTE: an invoice number should be unique to every invoice you send).
- The date the invoice was created.
- The payment due date and other payment terms.
- A list of all acceptable payment methods.
- A detailed list of all the goods and services rendered, including the corresponding price and quantity.
- The total amount owed to you by the client, along with additional fees and taxes.
Always keep in mind that an invoice is a document that requests clients for payment and serves as a transaction record. All of the information inside an invoice is necessary to let customers know what they’re being charged for. At the same time, it also details your expectations and compensations.
What is a Receipt?
While an invoice is a document that requests payment from a customer, a receipt serves as an official proof of payment. This document confirms that the customer has received the goods or services and has paid the seller or business for the money they owe. While businesses are not required to provide a receipt on all of their transactions, it is always given virtually to a customer after making a purchase. This level of relevance makes receipts common among both traditional and e-commerce merchants.
Like invoices, receipts can be given either physically or electronically. For physical businesses, receipts are typically written or printed on the spot. For e-commerce and even other brick and mortar businesses, the receipt is sent to the customer via email. Most e-commerce businesses send out email receipts right after the customer completes an order or purchase. Other online stores prefer sending a physical copy of the receipt along with the ordered product.
Receipts play an important role as a ‘proof-of-purchase document’ for both businesses and customers. In a recent survey, around 70 percent of Americans prefer paper receipts instead of digital. That means even businesses that operate exclusively online should consider sending out a physical receipt when delivering a product. No matter how you choose to send your receipt, always keep in mind that this document is essential for both you and your customer.
It serves as proof of purchase, which is crucial for businesses during inventory and tracking of purchased goods. On the other hand, customer can also keep their receipts to prove that they made a purchase from the business. Receipts will also be crucial during refunds and product returns. If your customers have an issue with your product, they can provide a receipt and send it back to the seller.
How to Write a Receipt
Creating a receipt is even simple than creating an invoice since they are much more comprehensive and detailed. Like a receipt, they also contain important information about a transaction. However, they don’t require a unique identification number or customer information. When composing a receipt, make sure it includes the following information:
- Your business name, company logo, and contact details.
- The date of sale
- An itemized list of products or services sold.
- The corresponding price of each sold product or service.
- Discounts or coupons.
- The total amount that the customer has paid, including sales fees or taxes.
Some receipts also include the payment method used by the customer. The term of sale and the seller’s return policy. This information will prove useful for customers who wish to make a return or exchange. Mistakes and errors have a significant impact on your customers and their experience with your business. That’s why providing as much detail as you can into your receipt will make it easier for both parties to fix any issue that may arise after the sale.
No matter how your business operates and what it offers, you will always find invoices and receipts relevant in any transaction. These documents are at opposite ends of the spectrum. However, they are still used hand-in-hand. An invoice is for requesting payment, while a receipt is the proof of payment. Make sure you understand the nature of these documents to know how to maximize them according to their uses. Hopefully, this article shed some light on everything you need to know about invoices and receipts.