Business documents

One engine, eight documents, all with your logo.

QuotationInvoicePayment receiptDelivery challanPurchase orderPayment voucherRent receiptGate pass
Accounting & finance

Shop billing, daily closing, statements of account and end-of-service gratuity.

Shop billingDaily closing and trial balanceStatement of accountGratuity calculatorNew
Islamic tools

Receipts, fee vouchers, timetables and registers, plus estate, qaza and Hajj and Umrah calculators.

Donation receiptMadrasa fee voucherPrayer timetableDistribution registerEstate settlement calculatorQaza namaz calculatorHajj & Umrah cost calculatorNew
Guides

Plain-language explainers on gratuity, Umrah and Hajj costs.

What a Pakistan sales tax invoice must containDaily cash book and trial balance basicsShop counter: billing, stock and udhaarHow UAE gratuity worksQatar gratuity explainedRealistic Umrah cost from PakistanMasjid and madrasa record keepingAll guides →
Guide · Invoices, billing and accounts

Invoice, Quotation, Receipt and Challan: What Is the Difference?

By Mufti Abdul Baseer · Published · Updated · 6 min read

In short

A quotation states a price before a sale, a purchase order commits the buyer to buying, a delivery challan records goods handed over, an invoice asks for payment, and a receipt proves payment was made. A statement of account summarises what is still owed. Each answers a different question, so using the wrong one causes disputes.

Why the difference matters

Small businesses often use one word, “bill”, for every piece of paper that passes between a seller and a buyer. That works until there is an argument. A customer says they were quoted a lower price. A supplier says the goods were delivered, and the buyer says nothing arrived. Someone says they paid, and there is nothing to show for it.

Each trading document exists to answer one specific question. When you know which question each answers, you know which paper to issue at each step, and you have the right evidence if a disagreement starts.

The documents side by side

Trading documents, who issues them and what each proves
DocumentIssued byWhenWhat it shows
QuotationSellerBefore the saleThe price and terms offered, and how long the offer stands
Purchase orderBuyerWhen the buyer decides to buyWhat the buyer has agreed to buy, at what price
Delivery challanSellerWhen goods leaveWhat was sent, in what quantity, and who received it
Gate passThe premises ownerWhen goods leave the premisesThat the goods are authorised to leave
InvoiceSellerAt or after supplyThe amount the buyer must pay, and by when
ReceiptSellerWhen payment is receivedThat a specific amount was paid, on what date, for what
Statement of accountSellerPeriodicallyInvoices, payments and the balance still owed

The order they are used in

  1. The customer asks for a price and you send a quotation with a validity date.
  2. The customer accepts and sends a purchase order, or confirms in writing.
  3. You prepare the goods and send them with a delivery challan, which the receiver signs.
  4. You issue an invoice for the goods delivered.
  5. The customer pays, and you issue a receipt for the amount received.
  6. If payments are spread over time, you send a statement showing the balance.

Not every sale needs every step. A shop selling over the counter issues one bill that serves as invoice and receipt together. A contractor may send a quotation, do the work, and issue an invoice and a receipt. The rule of thumb is that the more time passes between the agreement, the delivery and the payment, the more of these documents you need.

Quotation

A quotation is an offer. It sets out what you will supply and at what price, and it should state how long the price is valid, because costs change. A quotation is not a request for payment and not proof of a sale. Writing a validity date protects you from being held to a price after your costs have gone up.

Purchase order

A purchase order comes from the buyer. It records what they have agreed to buy, the quantities, the price and the delivery terms. For the seller it is the signal to go ahead. For the buyer it is the reference that the invoice must match, so a purchase order number belongs on the invoice and the challan.

Delivery challan and gate pass

A delivery challan records that goods have been handed over, with the quantity and the signature of the person receiving them. It usually carries no prices. Its value is evidence of delivery, which is the thing you need if a buyer claims that goods did not arrive or that the quantity was short.

A gate pass is different. It is an internal security document that authorises material to leave a factory, warehouse or office. It does not go to the customer, and it does not replace the challan.

Invoice

An invoice is a demand for payment. It lists what was supplied, the price, any discount and tax, the total, the due date and how to pay. It should carry a unique running number so that it can be traced and never duplicated. If you are registered for sales tax, the tax invoice has legal requirements of its own, covered in the guide on Pakistani sales tax invoices.

Receipt

A receipt is proof of payment. It states the amount received, the date, what it was for, the payment method and who received it. The key rule is that a receipt is issued only after money has actually been received. Issuing a receipt for a promise to pay causes serious trouble later. The receipt can also write the amount in words, which makes it harder to alter.

Statement of account

When a customer has several invoices and makes part payments, the picture becomes unclear. A statement lists the charges and payments in date order with a running balance and shows how old the unpaid amounts are. It is the document you send before a conversation about overdue payments, because it replaces an argument over memory with a list.

Common mistakes

  • Using an invoice as a receipt. An invoice asks for money. It does not prove that it was paid.
  • Issuing a receipt before the money has arrived.
  • Sending goods with only an invoice and no signed challan, which leaves no proof of delivery.
  • Quoting a price with no validity date.
  • Not matching the invoice to the purchase order number.
  • Reusing or skipping document numbers, which makes a record look unreliable.

Keeping the records

Keep a copy of every document you issue, in number order, and keep the signed challans and the receipts together with the invoice they relate to. A simple folder for each customer is enough for a small business. If you issue documents from a browser tool, download the PDF or the sheet each time and keep it, because documents made in your browser are not stored on a server.

Common questions

Can one document be both an invoice and a receipt?
Yes, in an over-the-counter sale where payment is made on the spot, one bill can serve as both. When payment comes later, issue an invoice first and a receipt when the money arrives.
Does a quotation bind me to the price?
It is an offer, so you may be expected to honour it while it is valid. That is why the validity date matters. Seek advice if a significant amount is involved.
Do I need a delivery challan if I send an invoice?
It is not always required, but it is the proof that goods were delivered and received, which an invoice does not provide.
What is the difference between a challan and a gate pass?
A challan goes with the goods to the customer and records delivery. A gate pass is internal and authorises the goods to leave the premises.

How this guide was prepared

This guide is based on standard trading and bookkeeping practice and on how the tools on this site produce each document. It does not quote a statute, because the documents differ in legal weight by business and by country. For legal requirements, such as the contents of a sales tax invoice, see the guide on Pakistani sales tax invoices and check with a professional.

Try the calculator

Invoice generatorQuotation generatorPayment receipt generatorDelivery challan generatorPurchase order generator

Keep reading

What a Pakistan sales tax invoice must containDaily cash book and trial balance basics

This guide is general information, not legal, financial or religious advice. Figures are estimates worked out from the sources above and may differ from what applies to you. See the disclaimer. Found a mistake? Tell us.