Payee | Payer | Payor: Complete Guide + Examples

Explanation | Differences | Examples

Emilie N.- FCCA, CB, MBS
Emilie N.- FCCA, CB, MBS

Emilie is a Certified Accountant and Banker with Master's in Business and 15 years of experience in finance and accounting from corporates, financial services firms - and fast growing start-ups.

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Contents

Meaning: What Is a Payee, Payer and Payor?

Payee, payer and payor are parties in an exchange of value, such as a provision of goods or services in exchange for a payment. The party making the payment is called a payer or payor, while a payee is the party receiving the payment.

Payee | Payer | Payor: Sender or Receiver?
Exchange of value Payee Payer (Payor)
Goods, services and other items of value Sender Recipient
Payment Recipient Sender

4 Differences: Payee vs. Payer vs. Payor

Top 4 Differences Between Payee and Payer (Payor)
Difference Payer (or Payor) Payee
#1 Buyer vs. Seller Buys products, services or other items of value from a payee Sells products, services or other items of value to a payer/payor
#2 Debtor vs. Creditor Debtor who owes to a creditor Creditor who is owed by a debtor
#3 Sender vs. Recipient Sender who makes a payment to a payee Recipient who receives a payment from a payer/payor
#4 Payer vs. Payee Opposite of a payee Opposite of a payer/payor

Payee vs. Payer: What is the difference between a payee and payer?

Payer and payee are the opposite parties to each other in an exchange transaction, where:

Payer vs. Payor: What is the difference between a payer and payor?

The terms payer and payor both have the same meaning and are used interchangeably to refer to one party of an exchange transaction that is responsible for a payment to another party, known as a payee.

The payor variant is less common and usually suited for more formal situations and legal documents.

Payee vs. Payor: What is the difference between a payee and payor?

The party in a financial transaction that makes a payment to another party is called a payor, while a payee is the party receiving the payment from the payor.

8 Examples: Payee, Payer and Payor in Real-Life Scenarios

#1 Personal Transactions

In both examples, John is the payer (payor).

The shoe shop, grocery store and car dealership that provide goods and services to John and in return receive his money are referred to as payees.

#2 Business Transactions

#3 Bank Transfer

Note that sometimes the payer and payee may be the same entity, for example when you transfer funds between your checking and savings accounts, make a deposit into or a withdrawal from your account.

#4 Check

#5 Paycheck

#6 Promissory Notes & Bonds

#7 Healthcare & Insurance

Top 3 examples of payees and payers (payors) in healthcare and insurance:

Payee vs. Payer in Healthcare & Insurance: 3 Examples
Example Payer (or Payor) Payee
1. Coverage Plan Individuals and entities send payments to insurance and healthcare providers to purchase coverage plans. Insurance and healthcare providers receive payments from individuals and entities in exchange for providing them with coverage.
2. Insurance Claim Insurance and healthcare providers pay out approved claims to insured individuals and entities. Insured individuals and entities receive compensation payments for their insurance claims.
3. Patient Care Patients and insurance providers reimburse doctors and medical practices for healthcare services. Doctors and medical practices get paid for patient care by healthcare insurance providers or the patients themselves.

#8 Tax

What Is a Payment?

Payment is a financial transaction where value is traded between two parties, with one party making a payment–a payee–and another party receiving the payment–a payer, also known as a payor.

Let’s take a closer look at how payments work >>

>> Payment

A payment from a payer (or payor) to a payee can take two basic forms:

1.  Financial transaction: Cash, check, bank wire transfer, electronic transfer, debit or credit card, money order, note or bill of exchange, stock shares or any other payment method.

2.  Barter transaction: Exchange of one item for another without using money.

>> Party

The terms payee and payer (payor) can refer to an individual or an entity:

1.  Individual person (e.g., customer, custodian)

2.  Public entity (e.g., government body)

3.  Private entity (e.g., business, trust, trade organization, non-profit)

Interestingly, there may be multiple payees and payers (payors) within one transaction. Conversely, the payee and payer can sometimes be one and the same entity.

>> Value

An exchange of value between a payer (payor) and payee includes:

1.  Transacting with goods and services

2.  Satisfying claims

3.  Fulfilling financial and legal obligations

4.  Trading anything that is of value or benefit to the parties

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Emilie N., FCCA, CB, MBS
Emilie N., FCCA, CB, MBS

Emilie is a Certified Accountant and Banker with Master's in Business and 15 years of experience in finance and accounting from large corporates and banks, as well as fast-growing start-ups.

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