What an invoice number is? An invoice number is a unique, sequential code that is applied to each individual invoice you send or receive. An invoice number is an essential component of every invoice you send. It helps:
- Identify and track invoices sent
- Log invoices that have been paid
- Stay on top of invoices that have payment outstanding
- Keep your business financials organized
- Help you prepare for tax time
Depending on your country and tax system, it might be a legal requirement for your invoices to include a unique invoice number. Even if it’s not a legal requirement, an invoice number is considered a business best practice.
When to Update Your Invoice Number
A different invoice number should be assigned to each and every new invoice you send.
The invoice number helps you easily identify a particular invoice when discussing payment with a client. For example, you might reference the invoice number when following up on unpaid invoices. Or the client may query a certain item by mentioning the invoice number it sits in.
When you have multiple invoices going to multiple clients, it is essential to have an easy system to track both the invoices you’ve sent and those that have been closed (i.e. paid in full).
Using an invoice number system helps you stay organized.
Note: If an invoice has an error and needs to be updated and resent, you keep the same invoice number on it, to make sure your client doesn’t log it as a separate invoice. Make sure to add an “updated” note in such incidents.
Where the Invoice Number Goes on an Invoice
Your invoice number should sit in a prominent place on your invoice template. It is usually found in the header area of an invoice, alongside the invoice date. (See image below)
If you’re writing invoices manually on a template built in Word and Excel, it’s essential you remember to update the invoice number and save the new version every single time you create an invoice.
Over time, this often becomes a field where people make mistakes that can lead to confusion with clients and delayed payment.
Better invoicing solutions and templates will automatically update your invoice number every time you create a new invoice, counting up from whatever your first invoice started. This gives you one less thing to think about so you can:
- Get invoices out the door quickly
- Save time going back-and-forth with clients re any errors on your invoices
- Get paid faster
How to Assign Invoice Numbers
(1) What Is an Invoice Number: Numerical Invoice Numbers
When it comes to assigning invoice numbers, many small business owners simply start at “1” and count up. This can quickly become unwieldy once you get into the tens-of-thousands.
Instead, consider a sequence that references the calendar year you’re in. This helps you keep fiscal years crisp, but also helps if you need to dig up an historical invoice.
An example of this kind of sequencing would be “190001”, where “19” is the current calendar year (i.e. 2019). The next invoices you send would be “19002”, “19003”, “19004” etc.
Pro-tip: If you’re starting out but want to create the impression that you have many clients under your belt:
(2) What Is an Invoice Number: Alphanumeric Invoice Numbers
Some business owners go beyond straightforward numbering sequences and use alphanumeric invoice numbers. This is a combination of sequential numbering and letters.
Sometimes the letters represent a client or project name. Again, this can be helpful when you have many invoices and want to know at-a-glance what is paid and what’s outstanding. Examples of this kind of sequence could be:
- 2019-DIT-0001
- 19-DIT-0001
(where “DIT” is an acronym for a client or project)
This approach might be complicated when using an automated solution, as these sequences are logically sequential once different clients and alphanumeric sequences are introduced.
Another alphanumeric sequence might simple contain letters like INV or your own business name (handy if you’re running multiple invoices. Examples might look like:
- ABC-19-0001
- XYZ-19-0001
(where “ABC” and “XYZ” are two different businesses I own, “19” is the year, and “0001” is the sequential component.)
What if You Want to Change Your Invoice Numbering System?
Maybe you’ve been in business for a while now and you’re changing your invoicing processes? Or you started out numbering your invoices 000001, 00002, 00003 and now your business is at a scale where this has become unwieldy.
Whatever the reason, it’s not uncommon to want to change your invoice numbering system.
The best time to do this is at the beginning of a new tax / fiscal year. So, if you can, make the switch after you close your books on a business year. This will help keep you records crisp over time.
In Summary: Keep Your Invoice Numbers Simple
There’s no need to “boil the ocean” when it comes to invoice numbers. The point is to create a unique system of identification for each and every invoice you send.
Take a moment to consider the invoice numbering system you adopt to make sure it’s easy and doesn’t become cumbersome as your business scales.
Consider choosing an invoicing template that automates updates to invoice numbers to save yourself the time and hassle of little errors. This may seem like an insignificant problem initially, but when it impacts that one big invoice you really need paid, you’ll be glad you invested in a better invoicing solution.