Highlights
Receipt of payment is a record that shows payment made for goods or services received.
A payment receipt is important to track finances, provide proof of payment, and avoid payment disputes.
Proof of payment can be done via both offline or online ways, including handwritten, printed, email, or mobile receipts.
At some point, all businesses will need to purchase goods or use a service from another business. Once this sort of transaction is finalized and payment has been made, you should receive a receipt of payment. This can also be referred to as a payment receipt or, more simply, as a receipt. The receipt is a proof of purchase document.
Through this article, we’ll explore the ins and outs of payment receipts, why it is important to issue this payment confirmation, and what details you need to include when making your proof payment receipt template.
What Is a Receipt of Payment?
A payment receipt is a document issued by a business (seller) to another business (buyer) or personal customer after payment has been made for either goods or services.
Receipts can also be issued when deposits or partial payments are made toward goods or services.
Is the Invoice a Receipt?
It's important to understand the distinctions between an invoice and a receipt for financial management and cash flow purposes.
When you buy something, a sales or store receipt is provided at the time of purchase and serves as proof of payment. Meanwhile, an invoice is a request for payment you send to your customers before payment is made.
The critical difference between an invoice and a receipt is their timing.
💡Tip: Check out our invoice guide and invoice vs. receipt article and learn more about the differences and when to use them.
How Can You Create a Payment Receipt?
There are a few ways to create a receipt of payment. In this guide, we'll show you practical ways to start creating a payment receipt.
1. Using Online Templates
If you find creating your payment receipt time-consuming, you can always look for various payment receipt templates available online.
Like Microsoft Word, which allows you to choose from the template galleries and recommendations with beautiful designs that let you customize for your personal needs.
You can also choose from other template providers online, like PandaDoc or Template.net, which offers a variety of free and paid payment receipt templates with many categories available for your business.
This option can help you create your receipt templates in minutes.
2. Creating Your Receipt of Payment
Using templates may not be your ideal choice for creating your payment receipt. If that is the case, you can consider developing your receipt of payment from scratch.
You may need to follow steps to ensure that your receipt has the right format and is functional for every business purpose.
What Details Should a Receipt of Payment Include?
Payment receipts vary in detail and depend on whether a receipt is issued in a paper form or email format.
However, some details, such as the payment method used, should always be presented. Other details include:
- Business details, such as name, address, contact information
- Customer details, including name, address, contact information
- Payment details, such as the date, amount, methods used to pay, or any additional notes
- Any applicable sales taxes
- Details of purchase(s) like dates, item description, quantities
- A receipt reference number
- Signature and date for payment verification
Example of a Payment Receipt:
Why Is a Receipt of Payment Important?
There are a few reasons why a receipt of payment is important, from both the customer's side of things and the business side. We will go through some common reasons why a receipt of payment is important below.
Business
Keeping a record of all receipts of payment is important for accounting purposes in any business. Payment receipts can record all business purchases made throughout a given tax year and beyond.
This is so that when it’s time to lodge your tax declaration, you can work out the total spent on business-type purchases while ensuring that upon request from the relevant tax authorities, you can provide proof of any claims you make towards tax deductions (jurisdiction dependent).
Customer
A sales receipt can be important for getting refunds (based on terms), for warranty or repair purposes if a product is faulty or breaks within a set period, or for exchanging goods.
Payment receipts can also be useful for those who are budgeting and understanding how much they spend on average on goods and services.
💡Tip: If a payment receipt is attached to a particular invoice, then the invoice number should be included on the receipt.
Maximizing Tax Deductions: Are Receipts Required for Expenses?
As a business owner, keeping track of all expenses for tax purposes is essential. When claiming deductions on your tax return, you must have documentation to support your claims, including receipts.
While bank or credit card statements can show the transaction amount, they are not considered adequate proof of a business expense.
It's crucial to retain the full sales receipt, which includes the date, the vendor's name, the items purchased, and the total amount paid. Without these details, the IRS may disallow the deduction, resulting in penalties or additional taxes owed.
Is It Mandatory to Provide Receipts to Customers?
The answer to this question is dependent on the country where a consumer resides and its consumer laws around payment receipts. At a country level, legislation might also vary between industries.
In most developed nations, it is recommended to provide proof of payment directly after making a payment. If a customer asks for a receipt, it is common practice to oblige to this request.
Here are some differences in policy at the country and industry levels.
| Country specific examples | Industry-specific examples | |
|
Example 1 |
In Australia for example, it is not mandatory for businesses to provide sales receipts for goods or services valued at under $75 Australian dollars. However, this changes if a request is made by the customer for a receipt of payment, which obligates a business no matter how much the goods or services cost. |
In the financial industry, when a customer is using a financial service that provides international bank-to-bank transfers using the SWIFT network, they can request something called the MT103 document if they wish. An MT103 is proof of payment of a cross-border payment. It must be requested directly by a customer, as it is not mandatory to be provided. |
|
Example 2 |
In Hong Kong, it is mandatory for retailers that are selling regulated goods to provide a receipt of payment. Retailers also must include specific details about the product on the receipt and/or invoice issued to the buyer. The date of purchase is important to detail for these sorts of goods. |
In the sale of an appliance or white goods such as a refrigerator or blender, companies that provide warranty terms on these types of goods as an assurance the goods should work effectively during the specified warranty time. A payment receipt, in this instance, will prove the date of your purchase and that it is within the warranty terms if something goes wrong. |
As you can see, there is not one global standard rule about providing a receipt of payment. As a business owner or even a customer, it is up to you to check the respective countries' laws or industry rules around issuing payment receipts.
How Can You Provide Proof of Payment Receipt?
As technology advances, so do the ways that receipts are being issued. Here are some ways a business can provide a payment receipt to their customer.
Offline Proof of Payment
These are considered "paper versions" of receipts and have been the primary method for how payment receipts have been issued for most of the 20th century.
Some examples of offline proof of payment include:
- Handwritten receipts: Used at the point of sale, which include details like the date of transaction, business name, description of goods or services provided, and amount paid;
- Printed receipts: Generated by POS systems, can be customized and include barcodes, QR codes, and other details;
Online Proof of Payment
Online proof of payment has gradually become the more popular method thanks to the evolution of the ecommerce industry and for any transactions that are made online.
Some examples of online proof of payment include:
- Email receipts: Electronic records that are typically sent via email and may include information similar to handwritten or printed receipts;
- Electronic payment: Confirmations provided by payment systems like PayPal, Stripe, or Apple Pay can be used as receipts and include details like transaction date and time, the amount paid, and payment method;
- Mobile receipts: Accessible via an app or web portal, with features like purchase tracking, transaction history, and saving receipts for future reference.
Bottom Line
It is usually always advised that a payment receipt should be issued upon purchasing goods and services, even if there is no refund policy, warranty terms, or exchange terms specific to a product or company policy.
Businesses can easily create a payment receipt by hand, using a receipt book, creating their template on a computer, or using invoice management software.
FAQs
How can I create receipt?
Here are some ways you can consider when creating a receipt of payment: 1. Use free and paid online templates, where you can customize and design them to fit your business needs. 2. Create your payment receipt from scratch, using essential details such as business and customer information, payment methods, applicable sales taxes, purchase details, reference number, and signature and date for payment verification.
Can you write your own receipt?
Is a receipt proof of payment?
What information should I include in a receipt?
