Invoice vs Receipt vs Purchase Order
Three documents that look similar but serve very different purposes. Here's when to use each one.
Quick Comparison
| Invoice | Receipt | Purchase Order | |
|---|---|---|---|
| Sent by | Seller → Buyer | Seller → Buyer | Buyer → Seller |
| When | After work / delivery | After payment | Before work begins |
| Purpose | Request payment | Confirm payment | Authorise a purchase |
| Legal status | Required (VAT-registered) | Best practice | Optional (but common) |
What Is an Invoice?
An invoice is a formal request for payment from a seller to a buyer. It's issued after goods have been delivered or services rendered, and it specifies what was provided, the amount owed, and when payment is due.
UK Legal Requirements for Invoices
- ✅ Unique invoice number (sequential)
- ✅ Invoice date
- ✅ Your business name, address, and contact details
- ✅ Client's name and address
- ✅ Description of goods or services
- ✅ Quantity and unit price
- ✅ Total amount due
- ✅ VAT amount and rate (if VAT-registered)
- ✅ Payment terms and due date
What Is a Receipt?
A receipt is proof that payment has been received. It's issued by the seller afterthe buyer pays. Receipts are common in retail but less formal in B2B — many businesses simply mark invoices as "Paid" instead of issuing a separate receipt.
What a Receipt Should Include
- ✅ Date of payment
- ✅ Amount paid
- ✅ Payment method (bank transfer, card, cash)
- ✅ Description of what was paid for
- ✅ Seller's business name
- ✅ Reference to the invoice (if applicable)
What Is a Purchase Order?
A purchase order (PO) is a document sent by a buyer to a sellerbefore any work begins. It authorises the purchase and specifies exactly what's being ordered, at what price, and when it's needed.
Purchase orders are common in larger organisations and public sector work. If a client sends you a PO, reference its number on your invoice to ensure smooth payment processing.
What a Purchase Order Includes
- ✅ PO number
- ✅ Buyer's details
- ✅ Seller's details
- ✅ Description, quantity, and price of goods/services
- ✅ Delivery date or schedule
- ✅ Payment terms
- ✅ Authorised signature
How They Work Together
- 1. Purchase Order — the buyer sends a PO authorising the purchase.
- 2. Goods/services delivered — the seller completes the work.
- 3. Invoice — the seller issues an invoice referencing the PO number.
- 4. Payment — the buyer pays the invoice.
- 5. Receipt — the seller confirms payment with a receipt (or marks the invoice as paid).
Frequently Asked Questions
What is the difference between an invoice and a receipt?
An invoice is a request for payment sent before payment is made. A receipt confirms that payment has been received.
What is a purchase order and when is it used?
A purchase order is sent by a buyer to a seller authorising a purchase before work begins. It specifies goods, quantities, and agreed prices.
Do I need to issue a receipt as well as an invoice?
Not always. For B2B, marking an invoice as paid usually suffices. For consumer sales, issuing a receipt at point of sale is standard practice.
Can an invoice serve as a receipt?
Not until payment is confirmed. Once paid, you can mark the invoice as "Paid" — this is widely accepted as proof of payment in B2B contexts.
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