When to issue each document
There are different stages of a sales process, and different documents reflect a specific stage.
Invoices, in particular, are issued when a client has agreed to the sale and committed to the payment (unlike pro forma invoices), but before the services or goods are delivered. The invoice thereby serves as a sort of sales contract that binds the business to provide its goods or services and the customer to pay for them by a certain date.
That being said, it is only a requirement by law in the UK for VAT-registered businesses to issue invoices. Many sole traders and companies not registered for VAT still decide to issue invoices to keep an orderly record of payments for bookkeeping.
Regardless of VAT status, receipts must be offered every time a customer or client pays a business. This is because an invoice does not prove whether it’s been paid. With a sales receipt, the customer can prove they paid on time and the business can file a copy for their accounting records.
If a business takes a payment immediately for a service or product provided there and then, it’s okay only to issue a sales receipt even if registered for VAT.
You can’t really combine an invoice with a receipt, although some invoicing apps attach “paid” labels to electronic invoices that were paid online via a link.