Invoice vs receipt

The two get confused because they carry most of the same details: who sold what to whom, and for how much. The difference is timing. An invoice is written before the money moves and says what is owed. A receipt is written after it has moved and says what was paid, when and how.

Why an invoice is not proof of payment

An invoice proves a charge was made, not that it was settled. A client's accountant knows that, and the US tax authority makes the same point from the other side. In IRS Publication 583, invoices and receipts are both listed as supporting documents, and "proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction". The payment shows money left, and the invoice shows what it was for. A client claiming the expense needs both.

In practice, most of your clients will already have proof of payment, because their bank statement shows the transfer. The ones who ask for a receipt usually have a process that needs a document saying "paid". For example, that might be an expense claim, a grant report, or a company reimbursing an employee who paid you out of their own pocket.

When one document is both

If the client pays at the moment of the sale (a card at a stall, cash at the end of a session), there's no gap for an invoice to fill. The document you hand over records the sale and the payment at once, and it's fine to call it a receipt.

Where VAT is involved, what's on the document matters more than its name. In the UK, HMRC's rule in VAT Notice 700 (section 16.2.1) is that a VAT-registered business must give a VAT invoice to a VAT-registered customer, because the customer needs it to reclaim the VAT. For a sale of £250 or less, and only if the customer agrees, a simplified VAT invoice will do (section 16.6.1). It shows your name, address and VAT registration number, the time of supply, a description of what was supplied, and the total including VAT with the VAT rate. On a sale that qualifies, a till receipt showing those can be the simplified VAT invoice. One that shows only an amount can't, whatever it's called.

What a receipt should say

There's no single legal form for a freelancer's receipt, so check what your own country requires. The practical content is short:

• Your name and the client's: as they appear on the invoice.
• The amount received: with the currency it arrived in.
• The date it arrived: not the date it was due, and not today's date if you're writing it later.
• How it was paid: bank transfer, card or cash.
• What it settles: the invoice number, or a description of the work if there was no invoice.
• A number of its own: so the receipt can be referred to without confusing it with the invoice it answers.

If only part of an invoice was paid, the receipt says so and says what is left. Say a client pays 500 of a 1,200 invoice. The receipt reads "Received 500 of 1,200 against INV-2026-041, 700 outstanding". The payment received email generator writes the covering email that says the same thing.

Marking the invoice paid instead

Many freelancers never write a separate receipt. They send the invoice back with the payment recorded on it and the balance at zero. For most clients I'd say that's enough, and it keeps the whole record on one page. However, it only works on two conditions:

• The payment date is on it. "Paid" without a date proves little.
• It keeps its original number. It's the same invoice with a payment noted, and a second number would leave a misleading gap in your sequence.

Making a receipt in the invoice generator

The invoice generator here has no separate receipt type, but you can change its wording to produce one:

1. Press + Add amount paid and enter the full amount received, so the balance reads zero.
2. Press + Change wording and set Document title to "Receipt".
3. In the same section, set Due date to "Paid on", then set the date itself to the day the money arrived.
4. Optionally rename the Balance due row to something like "Still owed".
5. Change the number to one of your own receipt series, and replace the default note, which says payment is due.

Be sure to do the last step. It's the easy one to miss, and a document titled "Receipt" with a footer asking for payment by a date contradicts itself. I'd also start the receipt series at a prefix of its own, so a receipt number is never mistaken for an invoice number.