Invoices and receipts are documents you handle when money is exchanged, and they often look similar at a glance. But while they are related, an invoice and a receipt serve very different purposes. Knowing when to issue each type of document can help you keep your finances organised and avoid confusing your clients. Below, we’ll explain the differences between invoices and receipts, when to use each one, and how they work together.

What’s in this article?

• What is the difference between an invoice and a receipt?
  
• When do you issue an invoice vs a receipt?
  
• How do invoices and receipts work together in accounting?
  
• Why do some clients request both an invoice and a receipt?
  
• What are common misconceptions about invoices and receipts?
  
• Can Stripe generate both invoices and receipts?
  

What is the difference between an invoice and a receipt?

An invoice is a document that a seller sends to a buyer as a formal request for payment for goods or services provided. It details the items or services sold, amount owed, payment terms, and due date. The seller issues an invoice before payment is made.

A receipt is a document issued after payment is made. The seller sends it to the buyer as proof of payment. It confirms that the buyer has paid the agreed amount for the goods or services.

When do you issue an invoice vs a receipt?

Invoices are part of the prepayment stage. They’re sent before payment is received, although the exact timing of invoice delivery depends on the agreement between the business and the client. If you’re a service provider, you typically issue an invoice to a client on project completion. In retail or wholesale transactions, you usually issue an invoice when goods are delivered.

Receipts mark the post-payment stage. They close the transaction loop and provide a record for both parties. A receipt is issued after payment has been received: a retailer often provides a receipt immediately at the point of sale, while a consultant or freelancer might send a receipt that acknowledges payment of an earlier invoice.

How do invoices and receipts work together in accounting?

An invoice starts a transaction: it indicates how much is owed, what the payment is for, and when payment needs to be completed. A receipt closes the transaction: it confirms that payment was completed and when. Together, they create an end-to-end record of each sale.

Here’s how these bookend documents work together to help with different financial and legal obligations.

Account reconciliation

Invoices show the money you’re expecting to receive, which lives in your accounts receivable.
Receipts confirm payments and move that money into your income. Without these documents, an unpaid invoice could be mistaken for revenue or a payment might go unrecorded. Invoices and receipts work together to make it easier to match payments to the right transactions.

Tax compliance

An invoice shows what you charged and any taxes involved, such as value-added tax (VAT) and sales tax. A receipt confirms those taxes were collected. Invoices and receipts together make it easier to calculate and prove how much tax you owe – or, in some cases, how much you can claim back.

Financial trends

Invoices tell you how much money customers owe you and when they need to pay. Receipts show what’s already been paid. Together, they help you see whether customers are paying on time, where you might have gaps in income, and how income lines up with your expenses.

Dispute resolution

An invoice spells out what was agreed – products, services, and terms. A receipt shows what was paid and when. If there’s a disagreement about what’s owed or whether payment was made, these documents can provide answers.

Why do some clients request both an invoice and a receipt?

When clients request both an invoice and a receipt, it’s because each document serves a distinct purpose. Here’s why some clients see value in having both.

To satisfy internal accounting systems

In many companies, invoices and receipts are used by different teams or systems:

• The accounts payable team tracks invoices so they know what needs to be paid.

• The finance or reconciliation team relies on receipts to confirm that payments have been processed and settled.

Having both documents helps these teams stay aligned, particularly in larger organisations where processes are highly segmented.

To meet tax and audit requirements

Tax laws in many countries require proof of the charge (invoice) and the payment (receipt) for certain deductions or compliance checks. For example:

• An invoice might show how much tax was charged, like VAT or goods and services tax (GST)

• A receipt confirms the tax was paid

Without both documents, a company could struggle to claim deductions or reimbursements or prove compliance during an audit.

For transparency in shared financial responsibilities

Some clients work in environments where spending is scrutinised by multiple stakeholders, such as non-profits, public agencies, and large corporate teams. They might need both documents to:

• Justify the expense to their leadership or boards

• Ensure transparency when they report costs to funders or customers

Providing clients with an invoice shows the charge was valid, while providing a receipt proves the funds were properly spent.

To resolve disputes

If there’s ever confusion about what was billed or paid, having both an invoice and a receipt makes it easier to clarify that. The invoice spells out the agreement, while the receipt confirms what was paid. This is especially valuable in industries where multiple transactions or payments can overlap, such as recurring services and large, phased projects.

To integrate with their own clients or customers

In some cases, your client might not be the end user; they could be an intermediary. For instance, an event organiser might pay you for services and then charge their client, or a consultant might bill you and pass the expense along to their client as part of a larger project. In these cases, they need both an invoice and a receipt to create their own accurate documentation for their customers.

What are common misconceptions about invoices and receipts?

If you mix up invoices and receipts or use them incorrectly, you risk confusing your clients or customers. Here are some of the most common misconceptions about invoices and receipts.

Receipts are unnecessary

Some businesses think receipts are optional, especially when payments are small or digital. But customers usually rely on receipts to track their spending, get reimbursed, or claim tax deductions. Skipping receipts can leave them frustrated – or worse, leave you unprepared for a dispute.

An invoice guarantees payment

Sending an invoice doesn’t mean the money is guaranteed. It’s a formal request for payment, but payment can still be delayed (or not happen at all). If you rely on invoices as guaranteed income, you could experience cash flow problems. Until the payment comes in, it’s just a promise, not money in the bank.

Digital payments make receipts obsolete

If someone pays online, they still need a receipt. They might get a confirmation email from their bank or payment app, but that doesn’t replace a proper receipt that outlines what they paid for and how. Skipping receipts in digital transactions can make your business look unprofessional and leave customers without the clarity they need for their records.

Invoices and receipts benefit only the seller

People often think invoices and receipts are only tools for sellers to get paid or keep their records straight, but they’re also useful for buyers. An invoice helps clients understand exactly what they’re paying for, while a receipt proves they’ve settled the bill.

Receipts are just for the customer

Similarly, receipts aren’t just for the customer. For businesses, they serve as proof of income, an audit trail, and an important part of tracking your finances. If you don’t issue receipts or keep them organised, you might struggle to reconcile your accounts, claim your own tax deductions, or defend yourself in a dispute.

Once a receipt is issued, the deal is done

A receipt confirms payment, but it doesn’t mean the transaction can’t change. A refund, return, or chargeback is still possible after a receipt is issued. A receipt is proof of payment, not the guaranteed end of a transaction.

Invoices don’t need to be detailed

Some people think vague invoices are fine as long as the total amount is correct. But that can lead to delays or disputes if a client doesn’t fully understand what they’re being billed for. Detailed invoices can minimise questions and save everyone time.

Printed documents are better than digital ones

Many businesses still believe that physical invoices and receipts are more “official” than digital versions. But digital documents are just as valid and usually more convenient for all parties. Sticking to paper can make your processes slower and harder to manage, while embracing digitised records can simplify your operations.

Only big businesses need invoices and receipts

Small businesses, freelancers, and people with side hustles sometimes think they don’t need to send formal invoices or receipts. But these documents help everyone track income, manage taxes, and protect themselves in disputes. Skipping these tools can make your business look less credible and lead to mistakes or lost income.

Can Stripe generate both invoices and receipts?

Stripe integrates invoices and receipts into a single system: it generates and sends the invoice and automatically creates a receipt when that invoice is paid. Here’s how Stripe handles each type of document.

Invoices with Stripe

To create and send an invoice, go to the “Invoices” section in the Stripe Dashboard or use the application programming interface (API) for a more advanced workflow. These invoices can be customised to include your business branding, such as logos, colours, and custom fields. Invoices can be sent manually for one-off charges or set up for recurring payments. Stripe Tax can automatically calculate taxes, including VAT and GST. Stripe invoices also include built-in payment links that let customers pay directly online via credit card, Automated Clearing House (ACH) transfer within the US, or other methods.

Once invoices are sent, Stripe tracks whether they’re paid, partially paid, or overdue.

Receipts with Stripe

Stripe automatically generates receipts for invoices paid through the platform. Similar to invoices, receipts can include your logo, business name, and contact details for a polished look. Receipts are immediately available on the Hosted Invoice Page after a payment is completed, whether it’s for a one-time charge or recurring billing. You can also manually issue receipts, if needed. To customise the look of your receipts, go to the Dashboard’s Branding section.