Invoice or Sales Receipt?

Have you ever wondered which you should use and when? Who hasn't?

One of the most common "errors" I have found in training office managers and bookkeeping is they often will use invoices when they should use a sales receipt.

So, what's the difference?

Invoices are used when you need to send a bill to a client that they can then pay before a set due date.

Sales Receipts are used when a client is purchasing at "point-of-sale" which just means immediately at booking or receiving a service. It's just like a receipt you get when you check out at the grocery store.

One example is when you have hay delivered, you will likely be paying via check (horse people are keeping the standard of paying via check alive!). Your supplier will likely have what resembles a notepad and will quickly write up a receipt for you. They will keep a copy and provide one to you. That's their sales receipt!

In accounting software, an invoice requires 2 actions: 1 to create the invoice on the account, and 1 to accept the payment against the invoice. Creating a sales receipt is a single action (combining the invoice creation of adding the sale items up then accepting payment at the same time and recording it as 1 transaction).

These transaction types also affect your ledgers differently. Invoices add to accounts receivable while sales receipts add straight to “cash” accounts.

There may be instances where you will want to use an invoice instead of a sales receipt for sake of consistency (i.e. boarder billing and payments).

Connecting the Dots: Invoices are typically not used in "Cash Basis" accounting but are necessary for "Accrual Basis" accounting where future owed amounts are tracked via Accounts Receivable.