To receipt or not to receipt? That is the question on many business owners’ lips and we’re here to answer it for you. Here, we delve into the following topics to help you understand the ins and outs of customer receipts:
- How invoices are different to receipts
- Remittance advice notes versus receipts
- Whether or not you’re legally obliged to provide receipts to your customers
- The benefits of issuing receipts
- Different payment methods and how you can create receipts for them
- Reasons to choose digital receipts over traditional paper receipts
How are invoices and receipts different?
If you thought the invoices you give your customers double as a receipt, think again! They’re actually two very different things and it’s important to acknowledge this.
- HMRC defines a receipt as an ‘acknowledgment of payment’
- An invoice is issued to request or confirm the payment to be made
For example, when you go to a restaurant and ask for the bill, you get a slip of paper with what you owe on it; think of that as an invoice. Then, once you pay your bill, you get another slip of paper that you can then take away with you; this is your receipt.
Apply this to how you sell to your customers and process their payments, and everything should start to make sense.
Are remittance advice slips the same as receipts?
Remittance advice information is another common source of confusion. Although both receipts and remittance slips are used to confirm a payment, they’re used at opposite ends of the transaction:
- Receipts: Given to customers by the seller to confirm that a payment was received
- Remittance: Given to sellers by the customer to confirm that a payment is on the way. Remittance notes can also be super handy when it comes to matching payments with invoices.
Is it a legal requirement to provide customers with invoices and receipts?
Invoices are only a legal requirement if both the seller and the customer are registered for VAT. There’s no requirement to provide your customers with a receipt to acknowledge their payment.
So, if you choose not to provide customers with receipts, you won’t get into any kind of legal trouble, but there are a number of benefits for issuing one.
What are the benefits of giving receipts to customers?
- They act as proof of purchase for the customer, which can make discussing orders or projects further down the line much easier. That way both you and the customer have a record of the transaction, including the date of sale, cost, and any discounts or promotions applied at the time.
- They’ll have a copy of the information relating to the transaction
- Peace of mind for the customer helps you build a stronger relationship with them.
- If you sell to other businesses, then they’re likely to request a receipt for their own records anyway, so it makes life easier if you have a process set up ready.
Different payment methods and ways to share receipts
The way you take payments from customers will partly depend on how you operate. An online business is unlikely to take in-person cash payments, for example!
What are the most common in-person payment methods?
In-person payments aren’t restricted to retail shops with a bricks-and-mortar presence. Mobile businesses or pop-up retailers might also deal with transactions face-to-face.
- Cash
- Point of sale (POS) card machine
- Card reader (attached to a mobile app)
- Invoicing app/software
In-person payment methods usually come with paper receipts, either from a POS machine or printer, or handwritten receipts.
Some of the most popular digital payment methods for an online business might include:
- Credit/debit cards
- PayPal
- Stripe
- Digital wallets (e.g., Google Pay, Apple Pay, etc.)
- Gift vouchers
- Invoicing clients (who will then make payment accordingly, such as using a payment link or making a bank transfer)
Digital payments are particularly useful because they mean digital receipts, and these can often be generated and shared to the customer automatically, without you having to intervene. For instance, if a client makes a purchase through your shop on an e-commerce platform, they’ll usually receive an email confirmation when they place the order.
Are digital receipts better than paper receipts?
Issuing digital receipts isn’t always possible or practical, particularly if you take an in-person payment and the customer doesn’t want to share their details, but they do have their advantages.
Digital receipts are far more eco-friendly
It goes without saying that digital receipts are a far more sustainable option than printed receipts which require paper and ink. Plus, digital receipts also reduce the amount of harmful BPA (chemicals found in paper receipts) that humans and the environment come into contact with.
The opportunity to capture customer data
Digital receipts delivered by email give you an opportunity to collect customers’ contact details and add them to your marketing communications list. Don’t forget to comply with GDPR regulations at all times though!
Saving costs on printing equipment
Without printed receipts, there’s no need to stock up on paper, ink, and printing machines, and all the costs and hassle that come with them.
Less paperwork and more efficient bookkeeping
Not having merchant copies of paper receipts to store and organise also makes life easier when it comes to your bookkeeping. With everything done digitally, there’s less need for boxes of dusty paperwork cluttering up the place and complicating your bookkeeping process.
Plus, making the move to digital record-keeping is another tick in the box for Making Tax Digital (MTD).
A slicker, quicker way to share information with your accountant
Digital records are far easier to share with your accountant than physical records, and that includes things like paper receipts. So, swapping printed receipts for a digital alternative will also streamline how you work with your accountant and make the process far more efficient for everybody.
Learn more about taking care of the finances in your business.