Roll numbers for students to employee numbers for payroll purposes, every number uniquely and unmistakably stands out as it works as identifiers. Invoicing is no different. A unique number is assigned to each invoice.
The basic purpose of the invoice is to request for timely payment from customers. You might have multiple clients, tracking payments made, partial payments, overdue payments, can be a real headache. Invoice number simplifies the payment tracking process and avoids all the confusion.
What is an invoice number?
Just like any identification number, an invoice number is a unique number generated for easy payment tracking. It acts as a reference to track the status of the payment of a particular client. The number should be clearly visible on the invoice.
The invoice number could be sequential, chronological, numeric, a combination of numbers and letters, project name and number, date of issue or any combination. But most importantly, each number should be unique. Examples of invoice number: 001, CN01, 20201030-403-01
Why is an invoice number important?
Invoice number is the most crucial aspect of every invoice. It’s actually a legal requirement. Not just for payment tracking, a properly assigned invoice number is important because:
- It helps to check on the income for tax and accounting
- It avoids duplication of invoices which would create a lot of confusion
- It’s essential for professional accounting services and for financial records
- Easy to track outstanding invoices
- It avoids duplicate payments
- Invoice number makes your business look legit
- Effortlessly track down invoices from several months ago
What should I put for the invoice number?
Before you decide with your invoice number, it is recommended to go through your country’s or state’s professional and legal requirements.
There is no hard and fast rule of following a particular format of invoice numbering. You can structure your invoice number the way you want. The assigned invoice number could be just numbers or a combination of alphabets and numbers. Eventually, the ideal criteria are to keep the number unique and sequential.
Invoice number best practices
Complicated style of assigning invoice number should be avoided as it will consume a lot of time and are much prone to errors. The best practice is to keep the invoice number in order like 1, 2,3. This way there will be no duplicate numbers, especially, if you are assigning numbers manually. It’s a good practice for new businesses as initially they wouldn’t have much number of invoices.
Additionally, the other practices to number invoices are:
A combination of letters and numbers (alphanumeric) – INV/01, INV/02, INV/03…..
An invoice number including letters, special characters and numbers will help to identify the invoices easily. Let the letters be the same, you just need to increase the number with each invoice. It should be sequential and do not contain any gaps.
Customer name + number – CN01, CN02, CN03…
Another option is to give the client invoice a letter code along with a unique number code. You can use the initials of the client name and prefix in the invoice number.
Project name + number – PN001, PN002, PN003…
If you are doing project-based work then you can format invoice number with project code prefix. This invoice number structure will include the project name and sequence number. You can even use any special character in between, like for example PN-001.
Chronological order with date and customer ID – 20201030-403-01, 20201030-403-02, 20201030-403-03 (yyyy/mm/dd-customer id-unique sequence number).
Chronological order with date and customer name 20201030-CN-01, 20201030-CN-02, 20201030-CN-03 (yyyy/mm/dd-customer name-unique sequence number).
It’s a detailed technique of invoice numbering in which you can include the date of the invoice issued. The date is used as a prefix, followed by customer ID or customer name short form and in between special characters are included for more clarity. However, this format makes the invoice numbers quite long.
Basically, whichever invoice structure you follow, the sequential number should always come at the end as it will easy to differentiate each invoice and track.
What if you want to change your invoice number series?
Never change invoice numbers mid-transaction.
In case if you are using the date or year in your invoice number then it has to be updated timely. If you are planning to completely change your invoice number series then it is better to wait until the next financial period so as to avoid confusion. Make sure you do not leave or repeat numbers while switching to another invoice number format.
How to avoid invoice numbering errors?
Incorrect invoice number due to typos, spelling errors or sequence disorder can be a nightmare, especially while filing taxes. To prevent such errors it is better to switch to some online invoicing software that automatically generates the invoice number and sequentially assigns the next invoice number as soon as you create the invoice. Online invoicing completely eliminates duplicate and missing numbers.
Alternatively, you can run a tool the duplicate invoice numbers and trace the errors.
Is the order number the same as the invoice number?
An order number is assigned to the goods ordered by the customers while the invoice number is the seller’s number for billing the goods ordered. In a few cases, one order number can have multiple invoice numbers.
Is the invoice number the same as bill number?
The invoice number and the bill number are not the same. An invoice number reflects a particular order while the bill number reflects a particular bill. A bill can be generated for multiple invoices.
Bill number is actually the total amount to your company and the total amount on the bill comes from the total of all the invoices.
Do you wish to end up as a business that’s powerful but is deteriorating? Certainly, not! Automating the invoicing process is the sure-shot way to ensure smooth cash flow. Set up an invoicing system that automates and streamlines most of the process, including invoice numbering. The possibility of confusion, errors will be totally eliminated.
Try using the user-friendly Billbooks cloud-based invoicing software and see how the invoicing process will be made easier. Invoice and invoice numbering both are pain-free.