Invoices are legal documents that all small businesses must make and keep a record of. They are used to charge for goods and services professionally and in a standardised way. Why, however, might a business that can use invoices happily, need a receipt book paired with them? What exactly is the benefit of using both?
The differences between them
The most significant difference is that an invoice requests payment and a receipt is a confirmation of payment. A receipt states the amount paid and the items received, similar to an invoice, but also includes the payment method.
A small business should know when both are necessary and how to make either. Difficult situations that would ask this knowledge include examples such as a client paying you in cash before being invoiced.
Effectively using invoices
An invoice, as stated previously, is the request of payment for goods/services. There are various different ways to use them, but all have a similar purpose.
Using invoices effectively requires knowing the correct type of invoice to use, and the details an invoice must have on it. More information for either can be found here and here respectively.
Always keep in mind that an invoice needs to be used as a description of the goods/services provided. A receipt might not have this information on it, as it’s simply a statement of the received payment and the method.
Effectively using receipts
Receipts are an effective way to log all income that the business has generated. Each one is a reference to an invoice that has been paid off. Keeping business receipts on hand is an excellent way to make taxes, as well as other accounting tasks, far easier. This falls under bookkeeping, which you can read more about here.
It is also important that small businesses know how to effectively give receipts too. Clients will want confirmation that their payment has gone through to avoid future complications. A receipt also serves as a reliable document in the case of fraud. As a result of this, giving receipts when necessary is a great way to encourage trust.
Receipts are not about the goods or services provided, they are entirely about the payment. Because this is the case, they require very little time and are easy to implement into cash flow calculations.
Both receipt books and invoices are vital in maintaining a business’s financial health. Using both allows for a seamless process that is both efficient and easy to use. All of this, whilst promoting a healthy working relationship with client. For an invoicing solution that notifies you of when a payment has been made, like a receipt, check out our app.