Business

Receipt of Payment: What is it and How to Create One

receipt of payment

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 receipts of payment, why it is important to issue this payment confirmation, and what sort of details you need to include when making your own proof payment receipt template.

What is a receipt of payment?

A receipt of payment is a document that is 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 any goods or services 

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 act as a record of 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 the exchange of goods.

Payment receipts can also be useful for those who are budgeting and understanding how much they spend on average on goods and services.

Is it mandatory to provide 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 a payment has been made. If a customer asks for a receipt, then 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 as a customer, it is up to you to check the respective countries' laws or industry rules around the issuance of payment receipts.  

How is a receipt of payment different from an invoice?

Just like an invoice, a receipt of payment plays a crucial role in the sales process.

An invoice is issued to request payment from the buyer, while the receipt of payment will be issued after payment has been made, signifying that the transaction is confirmed and completed. If an invoice is not provided, this does not mean that a payment receipt should also not be issued.  

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.

Paper proof

Paper versions of receipts have been the primary method for how payment receipts have been issued for most of the 20th century.

Originally, most payment receipts were handwritten, and then this evolved to the use of a receipt book. A receipt book contains receipt templates that are filled in by hand. If a business uses a cash register in the sales of goods, then the customer receives a cash register slip as their receipt of payment.

Email proof

Email proof has slowly become the more popular method thanks to the evolution of the E-commerce industry and for any transactions that are made online.

This includes the use of digital payment methods. Providing a receipt of payment is more sustainable, easier to store, and can be used as a unique selling point (USP) for businesses in all industries.  

What details should a receipt of payment template include?

Payment receipts vary in detail and really depend on if a receipt is issued in paper form or email format. However, some details that should always be present include 

  • business logo or name
  • the payment method used (cash or card)
  • the full amount of the purchase
  • the confirmation status of the transaction – whether the payment is confirmed or declined
  • any applicable sales taxes
  • details of a purchase
  • the date of purchase
  • a receipt number

If a payment receipt is attached to a particular invoice, then the invoice number should be included on the receipt. 

How can you create a payment receipt?

You can create your own digital receipt of payment with software like Microsoft (MS) Word, MS Excel, Google Docs, Google Sheets, Apple Pages, or with special invoicing software.

Many companies are turning to invoice software to make invoicing easier as this technology makes storing, sorting, and accessing old invoices easy.

Invoice software also helps create invoices, as well as other accounting documents, instantly that suit your business needs.

Bottom line

It is usually always advised that a payment receipt should be issued upon any purchase of 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 own template on a computer, or using invoicing software.

FAQs

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