Invoice vs receipt: what each document does, plus credit notes, purchase orders and statements
An invoice asks for payment and a receipt proves payment. This guide adds credit notes, purchase orders and statements, with a clear table of which to send when and a worked example.
An invoice asks for payment. A receipt proves payment. You send an invoice when money is owed, and a receipt once it has been paid. The same sale often has both: invoice first, receipt after. In a shop, where people pay on the spot, the receipt is usually the only document.
Three other documents get mixed up with these. A credit note reduces or cancels an invoice. A purchase order is the buyer's order, sent before anything is delivered. A statement is a summary of everything on a customer's account. Each answers a different question, and sending the wrong one causes most of the confusion in small business paperwork.
The five documents at a glance
| Document | Who sends it | When | Question it answers | Does it change what's owed? |
|---|---|---|---|---|
| Purchase order | The buyer | Before the goods or work | What are you ordering, at what price? | No, nothing is owed yet |
| Invoice | The seller | After delivery, or as agreed | How much do I owe, and by when? | Yes, it records the debt |
| Receipt | The seller | After payment | Did you get my money? | No, it records payment |
| Credit note | The seller | After an invoice, when it was too high | What are you taking off? | Yes, it reduces the debt |
| Statement | The seller | Monthly, or on request | Where does my account stand? | No, it only summarises |
Which to send when
| What just happened | Send |
|---|---|
| You finished a job and haven't been paid | Invoice |
| A customer paid in person or online | Receipt |
| You agreed a deposit before starting | A deposit request or invoice, then a receipt once paid |
| A customer returned something | Credit note, plus a refund if they've already paid |
| You overcharged on an invoice already sent | Credit note against that invoice |
| You undercharged on an invoice already sent | A new invoice for the difference |
| A customer has several open invoices | Statement |
| You're buying stock from a supplier | Purchase order |
| A customer's accounts team asks for a PO number | Ask them to issue one, then put it on your invoice |
| An invoice is late | A reminder, with a statement if there's more than one |
| You haven't agreed a price yet | A quote or estimate |
Invoice
An invoice is a request for payment for something supplied. It should show a unique number, your details, the customer's details, what was supplied, the date, the amount, any tax, and when and how to pay. For the fine detail, see how to write an invoice.
In the US, the IRS doesn't set a format. Publication 583 says that "except in a few cases, the law does not require any specific kind of records", and that you can use any system that clearly shows your income and expenses. Sales tax is set by your state, so check what your state wants shown.
In the UK, the rules are specific. GOV.UK lists what an invoice must include: a unique identification number, your business name, address and contact details, the customer's name and address, a clear description, the supply date, the invoice date, the amount charged, VAT if applicable, and the total owed. Sole traders and limited companies have extra items to show.
A pro forma invoice is a preview of an invoice, not a request that creates a debt. Label it clearly, and don't record it in your books as a sale.
Receipt
A receipt is proof that money changed hands. It should show the date, the amount paid, what it was for, how it was paid, and a reference. If a customer is claiming a business expense, the invoice and the receipt do different jobs. The IRS says that "proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction", and that invoices and similar documents help show you incurred the cost. So keep both sides.
Marking an invoice "Paid" and sending it again can work for a small job. A separate receipt is cleaner, because it gives you a payment reference and it can show part payments.
In the UK, a VAT-registered retailer has its own rules. VAT Notice 700 allows less detailed VAT invoices for sales of £250 or less, and a customer can ask for a full one. If you are VAT registered, read that section before designing your till receipt.
Credit note
A credit note is a formal correction that reduces an invoice. Use one when goods come back, a job came in lower, you gave an agreed reduction after invoicing, or you made a mistake. American firms often say "credit memo". It's the same thing.
Issue a credit note instead of deleting or editing the original. Your invoice numbers stay in sequence, your books show what happened, and the customer can match the two. It should give its own number and date, the original invoice number, the reason, the amount and any tax, and whether the money is being refunded or kept against future work.
VAT-registered businesses in the UK have firm rules. Under VAT Notice 700, a credit note must reflect a genuine mistake, overcharge or agreed reduction, and it must give the customer a real entitlement to the money, as a refund or as an offset against future supplies. It must also give the number and date of the original VAT invoice, or you must be able to show another way that VAT was accounted for. Where a credit note has no VAT adjustment, it should say "This is not a credit note for VAT".
Purchase order
A purchase order, or PO, comes from the buyer. It sets out what they want, at what price, delivered where and by when. For small firms it's useful in two ways: it stops arguments with suppliers about what was ordered, and it lets you match the supplier's invoice to what you agreed.
A PO is usually treated as an offer, so a binding deal normally needs the seller to accept. In US sales of goods, UCC 2-206 says an order for goods needed promptly can generally be accepted either by a prompt promise to ship or by shipping them. Don't assume a sent PO locks in the price until the supplier has confirmed it. Ask for that confirmation in writing.
When you're the seller and a larger customer gives you a PO number, put it on your invoice. Many accounts teams will not pay an invoice without one.
Statement
A statement lists a customer's invoices, payments and credits over a period, and it ends with the balance. It's not a new demand for money, so it shouldn't be recorded as a sale. Send one to customers who buy on account, or to anyone with more than one open invoice. It's also a polite way to surface a forgotten invoice.
A worked example
Say you're a plumber refitting a cafe's washroom for $1,200, tax aside for simplicity. You buy parts and the cafe wants a paper trail.
| Date | Document | From and to | Amount | Balance owed |
|---|---|---|---|---|
| March 2 | Purchase order PO-0115 for parts | You to supplier | $310 | Separate from the cafe's account |
| March 3 | Deposit invoice INV-0106 | You to cafe | $300 | $300 |
| March 3 | Receipt R-0088 | You to cafe | $300 paid | $0 |
| March 12 | Final invoice INV-0107, showing $1,200 less the $300 deposit | You to cafe | $900 | $900 |
| March 13 | Credit note CN-0009 against INV-0107, tap returned unused | You to cafe | $80 off | $820 |
| March 31 | Statement for March | You to cafe | Summary | $820 |
| April 2 | Receipt R-0091 | You to cafe | $820 paid | $0 |
Every number can be traced. INV-0107 was never edited. The $80 is a separate document with a reason attached, and the statement shows the cafe the only number it needs. For the deposit stage, see how to ask for a deposit.
Wording to copy
Receipt line:
Received with thanks: $300 by card on March 3, deposit for the washroom refit at 8 Hill Street. Balance of $900 due on completion.
Credit note reason:
Credit against invoice INV-0107: one basin tap, returned unused, $80. This will come off your balance, so you now owe $820.
Statement cover note:
Here's your March statement. It's for your records, and nothing new has been added. The balance is $820, from INV-0107 less credit CN-0009.
Purchase order note:
Please confirm you can supply these at these prices by March 5, and quote PO-0115 on your invoice.
How long to keep them
The IRS treats sales slips, paid bills, invoices, receipts and deposit slips as supporting documents and says to keep records as long as needed to prove income or deductions. Its usual period is three years, and it's longer in some situations, including six years when income is underreported by more than 25% of the gross income shown on the return. Employment tax records have a four-year minimum. Other countries and insurers may want longer, so check.
This is general information, not tax or legal advice. Ask your accountant how it applies to you.
Common mistakes
- Editing a sent invoice. Issue a credit note and, if needed, a new invoice.
- Reusing or skipping numbers. Each document type needs its own sequence.
- Sending a statement instead of an invoice. It shows a balance but gives accounts teams nothing to approve.
- Calling a quote an invoice. Nothing is owed until the customer has agreed and the terms say so.
- A credit note with no invoice number. The customer can't match it, and neither can your bookkeeper.
- Forgetting the deposit on the final invoice. It's a quick way to overcharge a customer who has already paid.
- No receipt for cash. With no card record, it's the only proof either side has.
Programmable has a ready-made page for each of these. A credit note shows what's credited and why, against which invoice, and whether it's refunded or kept for next time, and a statement gives one customer a balance with a single Pay button. They print cleanly for the books. If you take payment online, see getting paid by link.
Questions
Is an invoice the same as a receipt?
No. An invoice asks for payment and a receipt confirms that payment was made. A marked-paid invoice can work as proof for a small job, but a separate receipt is cleaner.
When should I issue a credit note?
When an invoice you've already sent was too high: goods came back, you agreed a reduction, or you made a mistake. Issue a credit note rather than editing the original invoice.
Is a statement a request for payment?
Not by itself. A statement summarises invoices, payments and credits on an account. It shows the balance due but doesn't create a new debt, so it isn't recorded as a sale.
Who issues a purchase order?
The buyer. It sets out what they want to order at what price. The seller then confirms it, delivers, and quotes the PO number on the invoice.