Explanation | Differences | Examples
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|
|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|
Payer and payee are the opposite parties to each other in an exchange transaction, where:
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.
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.
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.
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.
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.|
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 >>
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.
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.
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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