Invoice vs. Receipt: What's the Difference?

LearnMay 21, 20216 min read
Caroline Lu, Product Marketing Manager

What is an invoice?

Invoices are documents that specify the details of transactions between two parties. They ensure clarity and document the necessary information behind a monetary trade deal. An invoice details what was exchanged, what each individual item cost, and the exact quantity of items that were transacted. After all that information is taken into account, the final payable cost is determined based on all the other data, and it is presented to whoever is paying the invoice.

Invoices help businesses and contractors keep track of all the money and goods that they distribute and sell, as well as the income that they make off of the sales and purchases. Businesses can use inventory data from these invoices to become more organized and operate at a higher level of efficiency. There is a lot of information that goes into invoices that enables companies to be as organized as possible and maintain systems that promote maximum efficiency.

Another feature of invoices is that they can be used to ensure clear communication between a contractor and a client. By giving both parties access to a document that details payment information, there is less likely to be confusion regarding the amount owed to a client. This information is essential in the event of an audit because it can prove that a company has followed the proper procedures for payment reporting. Problems with the IRS could arise if invoices are inaccurate or have information that contradicts the invoices received by another company.

Many businesses and e-commerce companies have to deal with a very large number of invoices on a daily basis. This can lead to organizational issues and complications with large amounts of information that can occasionally be overwhelming.

Settle is a company that can help streamline and simplify invoice processing. We’ve experienced firsthand how time-consuming and cumbersome it can be to pay vendors, which is why we’re committed to reducing friction in a business’s pre-existing billing flow. Settle seamlessly pays and factors invoices using best-in-class invoicing tools for both brands and vendors.

What is a receipt?

A receipt is a written document that acknowledges that a transaction has occurred between two parties. This occurs in many different areas of business, ranging from business to consumer, business to business, and when trading stocks. Receipts are used to document and detail any time an object or service of value has been transferred to another entity. This is to make sure that both parties are on the same page about what occurred in the transaction, how much was paid if money is involved, and when the transaction took place.

Receipts often carry a fairly basic amount of information on them. The document details specifically what was transacted, and how much everything cost. They often also carry the date on them, just to ensure that both parties are on the same page in regards to when the transaction took place. There are many cases where both parties will retain receipts of the transaction, just to be able to better document and organize that information.

Receipts are also important if the transaction was operated with a warranty service or a return service. If the party who bought the item later wants to return their purchase, the company, if they allow warranties and returns in their terms of service, will almost certainly require the receipt to complete the return transaction. This is because the receipt ensures that the product that was purchased was purchased from them, and the customer isn’t bringing a product from another business or organization to return to the company.

It is also important to hold onto receipts to ensure that a business’s or entity’s transactions are fully and accurately documented. It is very easy to lose track of all the transactions that occur in and holding onto an organized list of receipts can be incredibly beneficial for making sure that all expenses are accounted for. Having specific receipts for every sale or purchase allows a business to maintain entirely accurate records of every transaction.

Receipts also allow businesses to have a source of accountability and an accurate representation of where their money goes, which comes in handy during tax season. When businesses don’t maintain records of their income, it’s easy to incorrectly complete tax documents at the end of the fiscal year. When businesses use receipts, they are able to accurately represent every source of outgoing and incoming money. This allows businesses to prove they are abiding by federal tax law in the event of an audit.

What is the difference between an invoice and a receipt?

On paper, receipts and invoices seem to function in a fairly similar manner. They both document transactions, they both have information about what occurred in the transaction, and they both can be used for historical documentation purposes. In practice, these two types of documents actually accomplish very different purposes and function very differently.

An invoice is a document that is given from the seller to the buyer, often after goods have been delivered, but before they have been paid for. Invoices are typically used when a business has sold goods in large quantities, and they are often very helpful for companies that need to organize their outstanding balances efficiently. They are also very useful for contractors and freelancers who are selling goods and services, and they use them to list the contents of every monetary deal that they make.

A receipt is a document that details a transaction that has already occurred, after the goods or services have been delivered and paid for. It essentially functions as a proof of payment for both parties, and is documented proof that both parties received either the products or monetary compensation for the transaction. Receipts are commonly used in brick and mortar stores but are also often used online to make a buyer aware of the purchase that they have made. Receipts help both parties to know that a transaction took place, when it took place, and that it is mutually agreed upon and recognized by both parties.

An invoice is typically used in a business transaction, documenting a payment that has yet to be made for goods and services that have already been delivered. A receipt is used in many different sectors, and it documents a completed payment for goods or services that have already been received. Understanding the difference between an invoice and a receipt can help businesses fully document both completed transactions and outstanding balances.

Settle makes paying invoices easy.

Settle's all-in-one platform is built for CPG and simplifies your accounts payable workflow so you can spend less time paying your vendors and more time growing your business. Our AP automation saves you time — with no setup fees, long-term contracts, or lengthy implementation timelines. Get started for free at Settle.com.

Sources:

SharePlatform iconPlatform iconPlatform icon

Subscribe to our newsletter


OR

Recommended Articles

What Are Net Terms?
Learn4 min read

What Are Net Terms?

Making use of net terms can enable both buyers and vendors to increase their profitability and sales dramatically. This is what net terms are.

Settle Spotlight Series: Q&A with Vividly
Learn9 min read

Settle Spotlight Series: Q&A with Vividly

We sit down to chat with Alyshah Walji from Vividly, a trade promotion management (TPM) software built by and for the consumer packaged goods industry.

What is the Cash Conversion Cycle?
Learn6 min read

What is the Cash Conversion Cycle?

A company’s cash conversion cycle can speak volumes about its operational efficiency and financial stability. It can also determine whether people get paid on time.

Accounts Receivable Factoring 101
Learn4 min read

Accounts Receivable Factoring 101

Accounts receivable factoring can help companies can improve their financial stability and cash flow. We’ll explain what it is and how it's beneficial in our guide.

How to Create an Invoice
Learn6 min read

How to Create an Invoice

Creating invoices can be tedious, especially for new businesses processing everything manually. Learn how to create invoices effectively and efficiently with this detailed guide.

Settle Spotlight Series: Q&A with SourceMedium
Learn14 min read

Settle Spotlight Series: Q&A with SourceMedium

In this month’s Settle Spotlight Series, we chatted with Will Holtz from SourceMedium about how interconnected data can be a superpower for brands in hyperscale mode.

Why Supply Chain Visibility Matters and How to Achieve It
Learn5 min read

Why Supply Chain Visibility Matters and How to Achieve It

Improving supply chain visibility is becoming a priority for many companies, as it’s essential for streamlining operations, boosting efficiency, and maintaining strong customer satisfaction for consumer brands.

Do I Need an ERP to Manage My Supply Chain?
Learn4 min read

Do I Need an ERP to Manage My Supply Chain?

Effectively managing a supply chain is essential for any consumer brand working with a network of suppliers, distributors, and partners. If you're considering an ERP for your business, here are some key factors to evaluate to ensure it meets your supply chain needs.

The 2024 Settle Staff Picks Holiday Gift Guide
Learn2 min read

The 2024 Settle Staff Picks Holiday Gift Guide

Do you really need another gift guide this time of year? Our Settle team spends so much time obsessing over our customer brands, that the right answer is obviously yes. We have compiled the inaugural Settle Staff Picks Holiday Gift Guide, with the most fire small brands out there. So read on for ideas from stocking stuffers to travel accessories – for everyone on your list. And join us in shopping small this holiday. 

Settle 2023 Product Wrap
New Feature3 min read

Settle 2023 Product Wrap

A year in review of Settle's product releases that make running CPG brands easier.

Your purchasing process. Made simple.
New Feature2 min read

Your purchasing process. Made simple.

We brought simplicity to bill pay. Now we’re bringing it to the purchasing process, with end-to-end support that takes a load off your plate.

Invoice vs. Receipt: What's the Difference?
Learn6 min read

Invoice vs. Receipt: What's the Difference?

Invoices and receipts are similar in concept, but differ in the details. Here’s what differentiates invoices from receipts, and why it’s important to understand.

The CPG Guide to Managing Tariff Uncertainty
Learn2 min read

The CPG Guide to Managing Tariff Uncertainty

Proper planning is key to protecting profit in times of tariff uncertainty. With potential plans to impose a 60% tariff on Chinese goods and a 10% to 20% tariff on other imported goods, many CPG brands are taking 4 key steps now so they don’t get a shock to their COGs.

What is an A/P Aging Report?
Learn6 min read

What is an A/P Aging Report?

The Accounts Payable Aging Report is an essential tool for businesses with a large number of accounts payable to track. Here’s a general breakdown of A/P Aging Reports.

What Are the Consequences of Equity Dilution?
Learn5 min read

What Are the Consequences of Equity Dilution?

Equity dilution can be a very concerning process for shareholders who are unfamiliar with its consequences. This is how to avoid equity dilution and keep stocks healthy.

What is the Accounts Payable Process?
Learn4 min read

What is the Accounts Payable Process?

Accounts payable (AP) refers to all the payments that a business owes its suppliers and creditors. Neglecting your accounts payable process can lead to production and supply issues.

Black Friday CPG Prep Checklist
Learn6 min read

Black Friday CPG Prep Checklist

Black Friday sets the tone for your business’ holiday season. Start early on forecasting demand, devising marketing strategies, and preparing your site.

How to Evaluate Accounting Firms
Learn7 min read

How to Evaluate Accounting Firms

Figuring how to find the right accounting firm for your company can be difficult. Here’s how to choose the best accounting firm for any business.

A Guide To Inventory Management for CPG
Learn6 min read

A Guide To Inventory Management for CPG

Learning to navigate inventory management can be a tricky part of growing your brand. Check out our guide to inventory management to find out more about it.

Non-Dilutive Funding Guide for CPG Brands
Learn7 min read

Non-Dilutive Funding Guide for CPG Brands

A popular source of funding is financing from angel investors and VCs. Yet many companies fail to recognise non-dilutive funding — where no ownership is lost.

Navigating Distribution And Retail Margins for CPG Brands
Learn8 min read

Navigating Distribution And Retail Margins for CPG Brands

For emerging CPG brands, navigating challenges like supply chain disruptions and retail changes underscores the critical importance of understanding and managing retailer and distributor margins, as it directly impacts profitability and success in the industry.

How to Find a CPG Distribution Partner
Learn5 min read

How to Find a CPG Distribution Partner

Partnering with the right distributor is arguably one of the most essential tasks for a retail company. Find out what to look for in distribution partners and how to source them.

Accounts Payable vs. Accounts Receivable
Learn5 min read

Accounts Payable vs. Accounts Receivable

Understanding accounts payable and accounts receivable is an essential part of business workflow. So how do they differ? Learn more about them in this guide.

An Introduction to Cash Flow Forecasting
Learn6 min read

An Introduction to Cash Flow Forecasting

A company’s ability to make a cash flow forecast is essential in the world of modern business. Here is everything you need to know about cash flow forecasting.

What Is Amazon FBA and Is It Right For You?
Learn7 min read

What Is Amazon FBA and Is It Right For You?

Using Amazon FBA is a great way for companies to expand their scalability and fulfillment abilities. Here is how it works, and how businesses can benefit from it.

How Long Does a Wire Transfer Take
Learn7 min read

How Long Does a Wire Transfer Take

Wire transfers can be the quickest method of exchanging funds. Knowing how long it takes can help determine whether wire transfer is the best solution.

Guide: The ABCs of cashflow
Learn2 min read

Guide: The ABCs of cashflow

We put our heads together with the folks at IndieCPG to create a guide to the basics of cashflow for new (and maybe even not-so-new) founders.

Settle blog

Insights in your inbox

Join our newsletter and never miss an update on Settle's latest features and industry trends.