Construction Invoices vs Receipts: What's the Difference

Invoices and receipts play a huge role in the construction industry — they’re how you get paid for services rendered and how you pay subcontractors, vendors, and suppliers. The natural complexity of construction projects makes invoice and receipt handling more complicated, too.  

Your accounts payable (AP) team captures and manages receipts and invoices from multiple construction sites all at once, in various stages of completion and with different trades and heavy machinery being used. And while invoices and receipts both record your construction company’s transactions, they need to be handled differently.  

Every receipt, invoice, and reimbursement must receive the accurate cost code. If your accountants or AP admins have trouble differentiating between invoices and receipts, you could end up dealing with processing errors that negatively impact the company’s financial management. That’s why it’s essential to understand the differences between receipts and invoices, including their common misconceptions, and learn invoice and receipt management best practices. 

Everything to Know About Invoices 

Invoices are your construction company’s bill of service for work you’ve completed. You may send invoices to clients when you reach certain project milestones or after you complete the job. Invoices are issued before you’ve received payment from your client (except a deposit). They detail what the client owes, how they should pay you, and the due date for payment.  

Construction companies also receive invoices from a project’s subcontractors, suppliers, and vendors. Your company is responsible for paying these invoices according to the invoice’s terms.  

Whether your business is sending or receiving invoices, they all must contain the following components: 

• The name and contact information of the business sending the invoice and the customer receiving it 

• A unique invoice number for identification purposes 

• The date the invoice was created and the payment due date 

• Specific billing terms 

• Accepted forms of payment 

• An itemized list or detailed description of all services or goods purchased that includes the quantity and price of each item 

• The total amount owed (including any fees or taxes) 

• Late payment penalties or fees 

All About Receipts 

Receipts are sent as proof of payment once the payment has been made, confirming that the buyer received the goods or services and the seller obtained payment. Your construction company will acquire receipts for purchases, such as building supplies, equipment rentals, or vendor and subcontractor services. You’re also responsible for sending receipts once you’ve received payments owed to your company. 

All receipts must include:  

• The name, address, and phone number of the seller 

• The date and the total amount of the payment 

• A list of the services or products purchased 
  

 Key Differences Between Receipts vs. Invoices 

The most significant difference between an invoice and a receipt is that invoices are issued before a payment is made to request payment, while receipts are a record of the payment being made. Invoices are a notification of the amount that’s due, and receipts show the total amount paid. For accounting purposes, receipts are recorded as income, while invoices are recorded in your accounts receivable. 

Another key difference is that your construction company can only use receipts to claim business expenses. Since invoices are not a confirmation of your payment, they can’t be used as a record of your business expenses. The only exception to this rule is if your invoice was marked as paid and has proof of payment attached.  

Common Misconceptions About Invoices and Receipts 

One common misconception is that you must send or receive an invoice for every transaction. While invoicing is always recommended and offers businesses legal protection when disputes arise, they’re not mandatory for transactions where payment is immediately collected. For example, if a crewmember purchases building materials or equipment for a job at a store, they’ll only be handed a receipt.  

Another misconception is that receipts and invoices must be printed out and physically sent to customers and sellers, but this isn’t the case. Electronic invoices and receipts are a perfectly valid form for recording completed transactions.  

4 Best Practices for Managing Invoices and Receipts 

Invoices and receipts ensure you’re getting paid for the construction work you’ve completed and allow you to expense business-related costs. Both are critical for preventing future payment disputes and keeping your company’s cash flow running smoothly. That’s why following best invoice and receipt management practices are key to maintaining efficient AP operations and your company’s overall financial health.  

1. Send Timely, Detailed Invoices with Clear Payment Terms
   When it comes to invoicing, you don’t want any confusion. Your invoices should contain a detailed project breakdown, including its dates, costs, and other relevant information. Delivering your invoice promptly once a project is complete (or reaches specific milestones) and offering fair payment terms—with various payment methods—helps ensure you’re paid sooner rather than later. 
   
   
2. Be Consistent About Following Up on Overdue Accounts
   Don’t let overdue accounts affect your company’s cash flow. Following up with vendors or clients personally can help, but it’s time-consuming. A good alternative is to use an invoicing system that offers automatic payment reminders when payments are past due.
   
   
3. Hold On to Receipts
   You may think you can toss receipts after you’ve recorded your expenses. However, since receipts are your proof of payment, you’ll want to keep them alongside your other financial files, digitally or physically, for at least three years. Why? For two reasons, receipts act as documentary evidence for tax and accounting purposes, and they protect you against future payment disputes.  
   
   
4. Keep Accurate, Organized Records
   Invoicing becomes more efficient when the information you need to create is easily accessible and accurate. Having a centralized, organized accounting system where you can quickly find invoicing data like service performed, hours worked, equipment used, change orders, and the appropriate coding is key.  

How Technology Helps Manage Invoices and Receipts 

Software can help streamline your entire receipt and invoice management process by eliminating manual data entry and directing all invoices and receipts to one place. From there, you’ll have complete, real-time visibility into every construction project, letting you check records for accuracy, track expenses, and create invoices fast. This technology typically integrates with your accounting ERP to simplify AP receipt and invoice handling processes. 

Consider hh2 for your invoice and receipt management needs. Our industry-specific software solutions connect your field with your back office, offering AP automation so you can handle invoices, receipts, and reimbursements with ease. Plus, with features such as project tracking and payment management, you can rest assured that you’re billing to the right job codes and keeping cash flow on track with timely payment. Book a demo to learn more.