After I first began as a contractor, I bear in mind sending out my first bill. It felt like a tangible signal that my enterprise was taking off. However because the initiatives rolled in and the invoices went out, I seen I had by no means issued a receipt.
At first, I puzzled if I used to be lacking a vital step. However as I dug deeper, I spotted that, in my line of labor, receipts aren’t obligatory. Invoices, nonetheless, are non-negotiable. They make sure that my purchasers and I have been on the identical web page concerning funds. This acquired me interested by how simply individuals confuse or synonymously use the phrases “bill” and “receipt.”
On this article, I’ll share what each invoices and receipts are so you possibly can perceive the variations and know when to make use of them.
Desk of Contents
Bill vs. Receipt
An bill is a doc you situation to request cost for services or products supplied to a buyer. A receipt is a doc that proves a buyer has paid for the services or products supplied.
Put one other means, an bill says, “Here’s a record of the services or products supplied, the cost due date, and how you can make cost.” A receipt says, “I acknowledge you’ve paid for the services or products I supplied.”
Accurately categorizing your invoices and receipts helps distinguish pending funds from settled funds. It additionally makes it simpler to report earnings precisely when submitting taxes.
There is likely to be plenty of confusion between these two, however they’re distinct.
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Professional tip: Automate your bill era utilizing HubSpot’s free invoicing software program. It helps you to create, ship, and observe invoices. It additionally lets you generate cost hyperlinks for HubSpot funds, Stripe, or PayPal. The end result is a streamlined cost assortment course of that eliminates handbook work.
Variations Between an Bill and a Receipt
There are three major variations I’ve seen between an bill and a receipt:
- Objective. An bill requests cost for a service or product, whereas a receipt confirms the client has paid. This distinctiveness is the premise for the opposite variations.
- Time of situation. You situation an bill after delivering the services or products, however the purchaser hasn’t paid. You situation a receipt solely after the shopper has paid.
- Particulars included. Invoices and receipts include related data however embrace distinct particulars.
Invoices include the client and vendor’s contact particulars, bill quantity, cost due date, description, amount and costs of services exchanged, and cost strategies.
Right here’s an instance of an bill:
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Professional tip: Use HubSpot’s free bill generator to shortly create your personal.
Receipts, alternatively, include the client and vendor’s contact particulars, receipt quantity, transaction date, gross sales tax, and the outline, amount, and costs of services exchanged.
Right here’s an instance of a receipt:
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When Are Invoices Issued?
Invoices request cost. So, you situation them with invoicing software program earlier than, not after, cost. Invoices are mostly utilized by service companies working on a pay-after-service or pay-as-you-go mannequin.
As an example, in my advertising and marketing enterprise, I situation an bill for 50% of the agreed cost earlier than beginning a undertaking. For initiatives with outlined milestones, I additionally situation an bill upon finishing every milestone.
When Are Receipts Issued?
You situation receipts after you’ve acquired cost for a services or products rendered. So, whenever you purchase french fries from McDonald’s or a pair of denims from a division retailer, the slip you obtain is a receipt, not an bill.
Ideally, it is best to situation a receipt each time a buyer makes a purchase order. This allows you to observe the funds made. Receipts additionally profit clients. They guarantee them they’ve paid accurately and make it simpler to request refunds if they’ve a difficulty with their order.
Professional tip: Take into account that companies want receipts to assert tax deductions. So, in the event you’re a B2B model, your clients will most probably request receipts.
Do You Have to Concern Each an Bill and a Receipt?
Authorized necessities for invoices and receipts range by location. In the USA, no federal legal guidelines mandate companies to situation invoices for each sale. Seek the advice of a finance or authorized skilled to know the rules in your state or nation.
As a basic rule, I like to recommend issuing a receipt for each buy. In case you’ve already despatched an bill, present a receipt after cost. This helps you observe earnings precisely and assists clients in sustaining their expense data. To scale back paperwork, some companies flip invoices into receipts by stamping them as paid.
That mentioned, some companies don’t present receipts until requested. For instance, Marc Chavez famous {that a} Chicago McDonald’s outlet solely offers receipts upon request, whereas close by Oak Garden retailers supply them routinely. He believes the previous goals to avoid wasting time and paper.
You don’t must ship an bill for transactions the place clients pay upfront or on the level of buy. As an example, a receipt alone will suffice in the event you run an internet clothes retailer.
Receipt vs. Bill Examples
Under is a real-world instance of an bill and receipt for plumbing companies supplied to Caroline Saunders by Michael Siebel Plumbing.
This instance accommodates all of the important data required in an bill, together with purchaser and vendor’s contact particulars, bill quantity, cost phrases and due date, record of companies and their costs, and cost methodology.
I prefer it features a cost hyperlink for handy invoice cost. Plus, it affords two cost strategies to keep away from back-and-forth between the corporate and its consumer.
This receipt additionally accommodates important details about the client and vendor. In contrast to the bill, it excludes details about cost phrases and due date. Nevertheless it features a receipt quantity, cost methodology, and cost date.
I like that the receipt additionally consists of the bill quantity. This makes it simple to reconcile a receipt with the related bill. It additionally shows the quantity payable in opposition to the quantity paid, clarifying that Caroline paid in full for the companies rendered.
Professional tip: If you wish to discover extra bill and receipt examples and templates, we have now extra sources on this put up.
Ultimate Phrases on Bill vs. Receipts
Invoices and receipts aren’t synonymous. Invoices request cost, whereas receipts function proof of cost. Companies sometimes ship invoices after they supply services or products earlier than the shopper pays. Many shoppers anticipate a receipt, so situation one after each profitable sale, even you probably have already despatched an bill.
Additionally, don’t neglect that legal guidelines governing receipts and invoices range by location, so I undoubtedly suggest consulting a neighborhood knowledgeable to be taught the very best practices to your space.
