Estimates, Invoices, and Sales Receipts: What’s the Difference?
Estimates, invoices, and sales receipts are sales documents that represent different stages of working with customers. Choosing the correct document ensures your financial records are accurate, your customer communications are clear, and your reports reflect the true state of your business.
Think of these documents as part of a natural progression—from pricing, to billing, to payment.
Overview
Each document serves a distinct purpose based on when work happens and when payment is received.
Estimates are used before work begins to share pricing.
Invoices are used after work is completed when payment is still owed.
Sales receipts are used when payment is received immediately.
Although they may look similar, each document affects your records differently.
Why These Differences Matter
Using the right document at the right time keeps your records accurate, meaningful, and easy to manage.
For your bookkeeping
Invoices track money customers owe you (Accounts Receivable)
Sales receipts record income immediately
Estimates do not affect your books until converted
For your customers
Professional, consistent documentation
Clear expectations around pricing and payment
Records they can use for their own accounting
For tax and reporting
Accurate income reporting
Clear documentation of business activity
A reliable audit trail if needed
For business decisions
Visibility into outstanding payments
Insight into which estimates convert to sales
Better understanding of cash flow
Estimates: Before the Work
“Here’s what it would cost.”
An estimate (also called a quote or proposal) provides a customer with an expected price before any work begins. Estimates help customers evaluate scope and cost but are not bills and do not affect financial reports until converted.
Key characteristics
Created before the customer commits
Can be accepted, rejected, or negotiated
Not legally binding
Does not record income or balances
Example
A landscaper provides a $2,500 estimate to redesign a backyard. The customer reviews and approves the pricing before work starts.
When estimates work best
Pricing needs approval before work begins
The job is large, custom, or planned
Scope may change
Common use cases: contractors, event planners, web developers, mechanics
Invoices: After the Work, Before Payment
“You owe this amount.”
An invoice is sent after work is completed or products are delivered when payment has not yet been received. Invoices create Accounts Receivable and help you track who owes you money.
Key characteristics
Issued after delivery or completion
Includes payment terms (Net 15, Net 30, etc.)
Tracks outstanding balances
Requires follow-up until paid
Example
A graphic designer completes a project and sends a $1,200 invoice with payment due in 15 days.
When invoices work best
Payment will be received later
You offer payment terms
You need to track unpaid balances
Common use cases: consultants, agencies, wholesalers, freelancers
Sales Receipts: Payment Happens Immediately
“Paid in full.”
A sales receipt records a completed transaction where payment is received at the time of sale. Because payment is immediate, there is no outstanding balance.
Key characteristics
Payment received right away
No Accounts Receivable created
Income recorded immediately
Serves as proof of purchase
Example
A coffee shop sells a latte and receives payment at checkout. The sales receipt records the transaction.
When sales receipts work best
Payment is collected on the spot
The sale is completed immediately
Common use cases: retail, salons, food trucks, in-person services
Common Sales Workflows
Estimate → Invoice → Payment
Customer requests pricing → estimate is approved → work completed → invoice sent → payment recorded
Example: A photographer estimates $800 for a wedding, converts it to an invoice after the event, and records payment when received.
Invoice → Payment
Work completed → invoice sent → payment recorded
Example: A monthly bookkeeping service invoices a client at month-end and receives payment later.
Direct Sale (Sales Receipt)
Product or service delivered → payment received → transaction complete
Example: A customer pays for grooming services at pickup, and a sales receipt records the sale.
Guidelines for Choosing the Right Document
Use this quick guidance when deciding:
Use an Estimate when pricing needs approval before work starts
Use an Invoice when work is complete but payment is still owed
Use a Sales Receipt when payment is received immediately
Choosing the correct document ensures your financial records reflect what’s actually happening in your business—and saves time correcting mistakes later.