Payment receipt or invoice: which one does your client need?

The client has just paid you in cash and asks for "a paper". Receipt, invoice, or both? The answer depends on the situation, but the principle is simple. A receipt proves that money was paid; an invoice describes what was sold. One does not replace the other, and many situations call for both.

Two documents, two jobs

The invoice describes the sale or service: what was supplied, at what price, with what tax, and what the client must pay. It is the accounting document that supports your revenue. Business clients need it for their own books.

The receipt confirms that a sum was paid on a given date. It protects the client: if they paid cash, it is their only proof. It protects you too: a signed, dated receipt ends any argument about whether a payment was made.

When to give a receipt

Receipts are most useful in four situations:

1. 1Cash payment: without a receipt, the client has no proof of payment.
2. 2Deposit: it confirms the amount paid before work starts.
3. 3Part-payment: it shows what was paid and what is still due.
4. 4Mobile money without a reference: it links the transfer clearly to the right invoice.

For a bank transfer, a receipt is not essential since the bank keeps a record. A short confirmation message is still good practice.

What a receipt should show

• your name or business name;
• the client's name;
• the date of payment;
• the amount received, in figures and, for cash, in words;
• the payment method: cash, mobile money, cheque;
• the invoice it relates to, by number;
• the balance due after this payment;
• your signature for a cash payment.

Writing the amount in words stops anyone altering the figure afterwards. It is an old habit, and still worth keeping for cash.

Example: a job paid in three instalments

The final invoice shows the full price and deducts the amounts already paid. Each receipt repeats the balance due, so the client always knows where they stand. How deposits fit into the sequence is covered in our guide to asking for a deposit.

One document for both?

For a small sale paid immediately and in full, the invoice can carry "Paid on [date] by [method]". It then doubles as proof of payment. For everything else, keep two separate documents: it is clearer for the client and safer for you.

Common mistakes with receipts

• Handing over a receipt instead of an invoice. A business client cannot book a receipt as a purchase. Give the invoice too.
• No invoice reference on the receipt. Months later, nobody knows which job the cash was for.
• No balance shown on a part-payment. The client may believe the job is fully paid.
• Receipts written on scraps of paper. They get lost, and you keep no copy. Use a numbered receipt book or, better, generate receipts from your software.
• Forgetting the date. An undated receipt proves very little if there is ever a dispute.

Keep a record

Keep a copy of every receipt or, better, record each payment against its invoice in your software. The receipt then becomes a summary generated from the recorded payment, with nothing typed twice. For mobile money payments, the tracking routine is in our article on mobile money payments.

Summary

What the invoice itself must contain is covered in our guide to what to put on an invoice.