Understand when to send an invoice and when to issue a receipt. Key differences explained simply.
Many small business owners and freelancers use the terms invoice and receipt interchangeably, but they serve different purposes. Understanding the difference helps you use each document correctly and stay organized.
An invoice is a document you send to a client before they pay. It is a request for payment that lists the products or services provided, the amount due, and the payment terms. You send an invoice when you have completed the work (or reached a milestone) and expect to be paid.
A receipt is a document you give to a client afterthey pay. It confirms that payment has been received. Receipts are important for the client's records and for your own bookkeeping.
| Aspect | Invoice | Receipt |
|---|---|---|
| Timing | Before payment | After payment |
| Purpose | Request payment | Confirm payment |
| Key fields | Due date, payment terms, itemized costs | Date paid, amount received, payment method |
| Tracking | Track paid/pending/overdue | Record of completed transactions |
Use an invoice when you complete a project milestone and need to request payment from your client. Issue a receipt once the payment arrives. Most businesses use both: an invoice to request money and a receipt to confirm it was received.
Terraform Documents lets you create both free invoices and free receipts from the same dashboard.