What is an Invoice Number and How to Create One

An invoice number is a unique identifier assigned to each invoice that a business creates. It helps track payments and avoid duplicate invoices. Invoice numbers are essential for any business to operate smoothly. In this comprehensive guide, we will dive into everything you need to know about invoice numbers.

What is an Invoice Number?

An invoice number, also called an invoice ID or reference number, is a unique code that is assigned to each invoice document. It is typically a combination of numbers, letters, and sometimes symbols

The main purpose of an invoice number is to identify and track invoices It allows both the vendor and customer to easily locate a specific invoice for payment tracking or query resolution

Invoice numbers are placed at the top of the invoice. They help vendors avoid sending duplicate invoices to customers, which can cause massive losses. The numbers also enable proper documentation of sales and expenses for tax purposes.

Why are Invoice Numbers Important?

Here are some key reasons why invoice numbers are crucial for businesses:

• Easy payment tracking – With a logical invoice numbering system, vendors can easily track paid and unpaid invoices even from months or years ago.

• Avoid duplicate payments – Unique invoice numbers prevent vendors from accidentally sending the same invoice twice, avoiding losses.

• Professionalism – Invoice numbers make businesses appear more professional and legitimate.

• Proper documentation for taxes – It enables proper record keeping of sales and expenses for tax reporting.

• Smooth invoice management – Numbers make it easy to find a specific invoice when needed for answering queries or record keeping.

Best Practices for Creating Invoice Numbers

There are several common methods companies use to generate invoice numbers:

1. Sequential Numbering

This involves numbering invoices in a continuous sequence, usually starting from 1. For example:

• 00001, 00002, 00003

• 00000001, 00000002, 00000003

Many businesses start with 9 or more zeros before the incremental numbers. This format provides room for plenty of future invoices.

2. Chronological Numbering

Chronological numbering includes the date in the invoice number. For example:

• YYMMDD-0001

• YYYYMMDD-0001

• 21/08/15-0001

The date helps identify when the invoice was created. The numbers at the end denote the sequence.

3. Customer Numbering

This adds the customer’s number to the invoice number. For example:

• CUST123-21/08/15-0001

• CLIENT45-YYYYMMDD-0001

The customer number enables easy tracking of invoices per client.

4. Project or Job Numbering

Some invoices relate to specific projects. In those cases, the project number can be included:

• PROJ342-0001

• JOB776-0001

This helps track invoices per project.

How to Assign the First Invoice Number

When creating your first ever invoice, how do you determine the invoice number? Here are some tips:

• Start with 1 – If going sequential, your first invoice can be #1, INV-001 or 000001.

• Begin from a higher number – For future growth, you may want to start from a number like 100001.

• Use the current date – The first number could include the date, like 21-08-15-0001.

• Add prefixes or suffixes – INV-000001 or 000001-IND are examples.

• Use software – Accounting software will automatically assign the first number.

Common Invoice Numbering Errors and Fixes

Despite best practices, invoice numbering errors can still occur:

• Typos – a letter instead of a number, or transposed characters.

• Duplicate numbers – sending two invoices with the same ID number by mistake.

• Gaps in numbering sequence – accidentally skipping a number.

• Invalid numbers – using letters in a numeric sequence.

To fix errors, invoice adjustments or cancellations may need to be made. The vendor should inform the customer and issue a corrected invoice with proper notes.

Using accounting software minimizes errors through automated numbering. But it’s still good to periodically review numbering for quality control.

Invoice Numbering Tips and Best Practices

Follow these tips for smooth invoice number creation:

• Make the numbers highly visible at the top of invoices.

• Be consistent in your numbering scheme once chosen.

• Keep an invoice numbering log to easily track the last assigned number.

• Use leading zeros in numbers to maintain equal digit length.

• Avoid special characters in numbers that could lead to errors.

• Periodically review sequences to catch any errors early.

The Bottom Line

FAQ About Invoice Numbers

What are some examples of invoice number formats?

Some common formats include sequential (0001), chronological (YYMMDD-0001), customer codes (cust123-0001) or projects (PROJABC-0001).

Does an invoice number have to be unique?

Yes, each invoice number should be unique to avoid duplication errors. Two invoices cannot share the same ID number.

Where is the invoice number located on the actual invoice?

The invoice number is typically placed prominently at the top right or top left corner of the invoice document.

Can an invoice number be changed or edited after creation?

It is not recommended. Invoice numbers should remain permanent for tracking purposes. If edits are needed, adjustments can be made on subsequent invoices.

Is there a maximum length for invoice numbers?

There is no standard maximum length. But numbers with 15-20 characters are common to allow inclusion of codes like customer IDs along with the sequence.

Ready to Create Professional Invoice Numbers?

Manually creating and tracking invoice numbers can be tedious. Modern online invoicing software like InvoiceOwl automates the entire process for you.

It enables creating professional invoices in seconds with pre-filled templates. InvoiceOwl automatically assigns sequential invoice numbers so you don’t have to worry about it.

Additional features include customization, customer management, reminder notifications, and integration with QuickBooks Online.

The software is designed for small businesses and freelancers to save time, avoid errors, and get paid faster. Sign up for a free trial today to simplify your invoice numbering!