What is an Invoice Number? Full Guide on How to Generate One

Each invoice has a unique and sequential code called an invoice number. Generating distinct numbers or codes for your invoices is the key to attaining a systematic payment management and bookkeeping process. In fact, invoices are not acknowledged as valid if they do not contain a proper invoice number.

Of course, there’s more to learn about invoice numbers and how to generate one for every transaction in your business. This article will serve as your handy guide, so be sure to read until the end!

Key Takeaways

• An invoice number is a unique, sequential number combination assigned to each invoice.
• Invoice numbers are essential in monitoring customer payments, managing inventories, and updating accounting records.
• Sequential, chronological, customer invoice, and project invoice numbering systems are among some common formats used to generate invoice numbers.
• You can produce invoices using Word, Excel, or Google Docs, but the easiest and most efficient way to do that is to use an online invoice generator.

What is an Invoice Number?

An invoice number is a sequentially arranged number or alphanumeric character combinations that are different for each invoice.

Invoices contain a complete list of the products or services purchased by a client from a business or seller, the payment terms agreed upon by both parties, and the total amount that the customer has to pay.

There are different ways to generate invoice numbers, so it is important to consider customer convenience, efficiency, and productivity when choosing the best method to assign invoice numbers for each transaction.

Why Is an Invoice Number Important?

Invoice numbers match payments to the correct invoices. It is also essential in the following areas of business management:

• Accounting and inventory management. Invoice numbers enable a smoother process of keeping tabs on your inventory and updating your accounting books.
• Sales and profit. Regardless of whether your business is a startup that's relatively new in the market or one that has already gained a significant number of patrons, you need a dependable system that helps you track your income and revenue.
• Customer payments. Since invoice numbers are unique to each purchase, you can use them to follow up on pending payments, verify that customers have received your invoice, and prevent instances of duplicate payments.
• Tax obligations and credibility. If you acquire the goods you sell from a supplier, invoice numbering is key in determining the tax amounts to be paid in purchasing retail goods. Also, invoice codes signify that both you and your suppliers operate legitimate businesses.

How to Generate Invoice Numbers [With Examples]

Here are some of the most ideal and efficient ways to generate invoice numbers:

#1. Sequential Invoice Numbering System

The sequential invoice numbering system follows a straightforward consecutive invoice numbering. The numbers on the invoice follow either a descending or ascending arrangement.

Ideally, you must include your customer’s name at the beginning of the invoice ID to avoid mixing up your invoices.

Examples of sequential invoice numbering:

• NAME_0001, NAME_0002, NAME_0003
• 0000000001, 0000000002, 0000000003

#2. Chronological Invoice Numbering System

The numbering system includes the year, month, and date in the invoice number using any of the following formats: YYYY-MM-DD, DD-MM-YYYY, MM-DD-YYYY.

The date refers to the date when the invoice was issued. Adding it to the invoice number keeps invoices from getting duplicated and ensures that they contain correct and precise information.

Examples of chronological invoice numbering look like this:

• 20230325-001
• 25032023-002
• 03252023-003

The last three digits in a chronological invoice numbering (001, 002) distinguish the order when the invoice is issued.

#3. Customer Invoice Numbering System

Instead of including the customer’s name in the invoice, you can assign a specific number combination to each of them. At times, the issuance date is also included and followed by the sequence number. It keeps invoice numbers shorter and easier to organize.

Let’s say you assigned the number 20 to your customer. Here’s what your invoice number would look like:

• 20-001, 20-002, 20-003
• 20232503-20-001

#4. Project Invoice Number

The project invoice number is similar to the customer invoice numbering system—the only difference is a unique number assigned to a project.

Businesses that provide multiple services or work on several projects for a variety of clients often use this numbering system when creating their invoices. It is an effective way to stay ahead of things while working on several various client requests.

It also keeps them from intermixing payments and invoicing schedules for different projects.

You can see some examples of project invoice numbers below:

• 1018—001
• 20232503-1018-001

Do You Need to Update Invoice Numbers?

Invoice numbers should be updated, especially when the format used includes the date when the invoice was issued. Specifically, the year indicated in the invoice ID must be changed accordingly every time a new year begins.

Avoid reusing invoice numbers, as it will complicate your auditing. Remember, you need to record everything in your accounting book, and that includes invoices that have been voided, client orders that were canceled, as well as late payments.

As such, reusing and failing to update your invoice numbers is almost the same as duplicating them. If you’re not careful, you could be losing profit and even your customer’s trust faster than you can generate a short and simple invoice number sequence.

How to Make Invoices for Your Business

The most common and easiest ways to create invoices for your business involve the use of either of the following:

#1. Word or Excel

1. Open a blank Word file or Excel sheet.
2. On Word, click File > New Template. Type ‘invoice’ on the search bar once you are redirected to a library of templates, or look for the invoice icon in the dialog box.
3. On Excel, type ‘invoice’ on the search bar at the top menu or look for the invoice icon in the dialog box.
4. Pick a template and then just edit and customize it with your business logo and the necessary information.
5. Save the invoice and email it to your client.

#2. Google Docs

1. Log in to your Google account.
2. Choose an invoice template from the Google Sheets gallery. Choose a template that best suits your business and save your template of choice.
3. If you are using a free account, label your template of choice as ‘Template’ on the title section of the blank document. Then, click File > Make a Copy to create a new invoice.
4. If you are using a Google Workspace account, all you have to do is add the invoice template that you picked in your template gallery and use it to create new invoices later on.

#3. Free Invoice Generator

If you don’t have the time to go through all the steps described above, you can always choose the easiest route and use an online invoice generator instead.

How to Create Professional Invoices Easily With a Free Generator

Paystub lets you customize and create professional invoices in a matter of minutes. With free templates and a user-friendly layout, you can generate invoices and send them instantly to your customers.

Using our invoice generator takes four simple steps:

1. Open the invoice generator.
2. Add your business and customer information, along with all the necessary details of the transaction to the blank boxes.
3. Preview the invoice to review the details one last time. If you’re satisfied, generate the invoice and download it. You can save the invoices in a Word or PDF format.

Invoice Number FAQ

#1. Do all invoices have a number?

Yes. All invoices must have a unique and sequential code assigned to them to prevent duplicate invoices or payments and enable a systematic payment tracking and accounting system.

#2. Is VAT number the same as invoice number?

No. VAT numbers are used by businesses that are VAT-registered for tax purposes. Non-VAT registered businesses need not use a VAT number, nor are they allowed to charge value-added tax on their goods.

#3. How many digits is an invoice number?

It will all depend on the format you use in creating your invoice numbers. There is no definitive or fixed amount of digits required to appear in your invoice ID.

#4. What is an example of an invoice number?

An example of an invoice number is INV-20230807-005. The first combination of numbers refers to the date when the invoice was issued, which is August 7, 2023. The last three digits, 005, represent the sequence of the invoice.

Final Thoughts

Assigning unique codes or numbers to your invoices should be on top of your to-do list when managing customer orders and payments. Not only is it essential in monitoring customer payments, but it is also integral in accounting all of your expenses, losses, and profits.

If your business is VAT-registered, you need both your invoice and VAT numbers to file your taxes.

Use the numbering system tips listed in this article or our invoice generator to ensure you never miss this simple yet extremely crucial detail in your billing process!