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Receipt vs Invoice - Terminology

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Hi all - something that's been niggling in my mind for a while...

Why is the term "invoice" used interchangeably with "receipt" in some businesses? Clearly nobody would issue a receipt before payment is made, but why do some businesses issue "invoices" before and after payment? Is there any difference between a receipt and an invoice issued after payment?

From my simplistic point of view, it would be clearer if an invoice recorded how much you were supposed to pay, and a receipt recorded how much you have paid. What am I missing?

Also, is there a strategic reason why some companies are so slow to issue VAT receipts (or invoices) after payment? 

 

 

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23rd May 2019 13:21

Invoice's are used before someone pays, receipt as the name suggests is the receipt of a payment made so comes after the payment.

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By rgbgr
to GranulatedSheffield
23rd May 2019 13:26

In a sensible world I completely agree. 30 seconds ago I received an email from a medium-sized company with a "sales invoice" attached which states "this invoice has been paid". Is this not just a receipt?

Also, HMRC want a "VAT invoice" so I can reclaim input tax. Why not a "VAT receipt"?

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to rgbgr
23rd May 2019 13:45

I would say yes thats a receipt and an invoice. HMRC are worried about when the transaction actually occurred not when the payment was made so want an invoice if you are using the accrual vat regs. If you use cash basis a receipt is fine and required though near all business's use accrual method in the uk.

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to GranulatedSheffield
23rd May 2019 16:27

GranulatedSheffield wrote:
..... though near all businesses use accrual method in the uk.

A bold statement. In terms of numbers - as opposed to value - I would suggest the opposite.

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By johnt27
23rd May 2019 15:15

rgbgr wrote:

Also, is there a strategic reason why some companies are so slow to issue VAT receipts (or invoices) after payment? 

 

 

No strategic reason, just bad admin.

In the instance where businesses send out VAT receipts after payment (usually professional firms) this is because they are using a VAT loophole that allows you to send a request for payment (which doesn't trigger a VAT point). Essentially this gives you the same type of bad debt relief you get under the cash accounting scheme.

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23rd May 2019 17:08

Most B2C transactions are for cash (meaning immediate payment rather than notes and coins). In that context the document issued is both receipt and invoice, with the result that the terms end up being used interchangeably.

Most B2B transactions involve credit and so the document used is an invoice. A receipt is essentially evidence of payment and few businesses issue receipts.

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