When someone pays for the product or service you provided for them, you will need to issue them a receipt of payment, also known as a payment receipt. This simple receipt form provides both you and the customer with proof of payment. Thus, you both have a record that you, the service provider, have received and accepted payment on behalf of your small business. The form will also tell you the date the payment was received and what precisely the payment was for, making this an important part of your accounting records.
Understanding how to create payment receipts and the importance of tracking them can help you improve your record keeping skills and help you feel more in control of your finances. The better you can understand your cash flow, the easier it will be to gauge your business success and keep yourself on track to grow and thrive.
We will explore what you need to know about payment receipts and how you can create your own.
Why Do I Need to Provide a Payment Receipt?
A payment receipt plays an important role in your bookkeeping. It will let you and the payer know the total amount due for the service and note when and how the customer made the payment. You might also include the subtotal from different portions of the job on the receipt form. For example, if you bake a fancy, highly decorated custom cake for a customer, you might note the subtotal for the hours of labor needed and the ingredients used.
These receipts can then help you keep track of your different jobs so you know which ones have been paid and which ones have not. This information allows you to track to which accounts you need to reach out and resend the invoice to let the customer know that they still owe you payment.
A payment receipt can be used across a variety of different industries. For example, after you check out of your hotel room and fully pay your bill, you may receive a hotel receipt that notes your payment. Similarly, those who rent their homes may receive a rent receipt from their landlord after paying their rent.
Failing to notice that a bill has not been paid can cost your business tremendous amounts of money. At the same time, accidentally trying to collect from someone who had already paid causes a terrible customer experience and can damage your reputation. Providing and tracking your payment receipts helps to avoid these situations.
Remember that depending upon how your business is structured, you may also encounter the importance of a partial payment receipt. For example, if a customer needs to pay you in parts for a larger service, then you can issue this receipt to mark how much of the cost they have paid and how much remains. This helps you both track the debt and know when it is fully paid off.
What Is the Difference Between a Payment Receipt, Invoice, and Sales Receipt?
As you begin to bring customers to your business, you will find a variety of different forms that you will likely use throughout the process, such as quotes, invoices, payment receipts, and sales receipts. Of these four, invoices, payment receipts, and sales receipts often seem the most similar, and people might feel confused about the differences between them.
Invoicing customers, however, occurs when you let the customers know what they owe for your services provided. It does not include their payment. In other words, you provide your invoice to your customer once the job is done to let them know what they will need to pay and when the payment is due.
However, the main difference between a sales receipt and a payment receipt lies with the timing of the payment. If you sell a product or service for a customer and expect payment right at that minute, such as a store owner expecting payment for a product sold, you issue the sales receipt. On the other hand, if you expect payment at a later date, you issue the customer a combination of an invoice-- after the work is completed and a payment receipt once the payment has been made. For example, if you work as a painter, then you might provide a customer with an invoice after the job. When they mail in a check a week later, you will give them a payment receipt acknowledging the payment and when it was received.
Should I Keep All My Payment Receipts?
As a small business owner, you should keep your payment receipts to help with your bookkeeping. When it comes to paying taxes to the IRS and reporting your business revenue and expenses, you want to make sure that your records are in perfect condition. Keeping a receipt book with each receipt can help you confidently track your finances and precisely know how your business performs.
Even outside of tax time, tracking your receipts can help you manage which accounts you need to follow up on and which ones you can officially check off in your books. If you have several people at your business, quality record keeping will also help you avoid costly mistakes because of miscommunications with the staff. Do not miss out on a payment because you hadn't realized you were missing money from a customer.
What Should Receipt Templates Include?
You can use a variety of programs to create your receipts. Many customers will want a printable receipt that they can keep for their own records, but digital copies work well, too. You can use a free receipt template, like this one here from Skynova, or follow our sample receipt here and create one on your own.
You will start your payment receipt template by recording your business information. You should list your:
- Business name
- Your contact information (including your billing address and phone number)
- Your logo, which helps to brand the receipt and cement your brand in the customer's mind.
Since your payment receipt will likely be paired with an invoice, it can also be helpful to reference the invoice number for your own records. This will help you match the payment receipt to the invoice.
You also want to number your receipts. A receipt number can help you track your receipts and easily reference them as you work on your bookkeeping. Your payment receipt template, therefore, should include a place for your receipt number.
To create receipts successfully and customize them, you will want to list the total services you provided, including any subtasks associated with the job. This helps customers understand their total and remember precisely what they paid for at your business.
Finally, you will want to record the method of payment that the customer used to settle their bill. You will want to note options such as:
- A cash payment
- Credit card
- PayPal (if you can accept this payment)
- Wire transfer
Some of these will be very simple and straightforward, particularly a cash receipt template. You will only need to mark that the customer paid cash and the amount paid. However, many business owners find it helpful to include details such as check numbers or the final digitals of the credit card on their receipts from other payment methods.
When you create a payment receipt with these key sections, the only step left will be sending it off to your customer and filing a copy in your financial records.
Track Your Finances With Skynova
As you build your business, you will find that accounting is one of the most important tasks you cover each day. Knowing how much money your business has coming out compared to how much you have to spend will have an incredible impact on how you run your business and when you invest in growth.
Fortunately, accounting software from Skynova was designed precisely for small business owners like you. With a straightforward interface, our platform makes it simple for you to track your revenue and expenses. We have also created an extensive learning center for small business owners to explore and learn about the details of running a small business successfully.
In addition to the accounting software, you will also have access to a range of helpful templates, like a payment receipt template and an invoice template. These straightforward forms will help you quickly produce the key documents you need to keep your business growing.
Come and see how easy it is to improve your accounting and your ability to track invoice progress and payments with the help of Skynova.
Notice to the Reader
The content within this article is meant to be used as general accounting and billing guidelines and may not apply to your specific situation. Always consult with a professional accountant to ensure you're meeting accounting standards.