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What is an invoice number?

September 1, 2021
Whether you're an experienced freelancer or a new business owner running your own small business, it's likely that you'll be dealing with invoicing on a regular basis. Invoices are the backbone of your business and act as so much more than just a means of getting paid.An invoice provides a paper trail between the buyer and seller. It helps you keep on track with your payments, simplify the tax season and provides all the information that your customer needs in one handy document.So clearly, they are integral to your business. However, how much do you know about the invoice number? And how do you go about creating your own invoice number?In this article, we take an in-depth look into invoice numbers, why they are essential to the invoicing process and how to create your own.

What is an invoice number?

An invoice number is the unique set of numerical or alphanumerical digits assigned to each invoice you send to a client or customer to request payment.The invoice number is clearly displayed along the top of the invoice and is used to track and organise your invoices so that you can easily know what money you are expecting to come into your business, and what has already been paid.

What is an invoice?

An invoice is a document sent to your customer after they have purchased a product or service. This document is used as a record of the sale and acts as a way to request payment.An invoice is a legal document that creates a binding agreement between the buyer and the seller to pay an agreed price for the product or service.Regardless of whether your business supplies products or services, you will need to provide an invoice. A basic invoice will usually include:
    Invoice numberInvoice dateItem or service descriptionAgreed unit pricePayment termsDiscounts (if applicable)Taxes (if applicable, e.g. VAT)Total amount dueInvoice due dateAcceptable methods of paymentCompany name & contact information of the seller and buyerSignature of seller

Why are invoice numbers important?

The invoice number is an integral part of the invoice document and, as identified above, is a required feature. The invoice number is a unique identifier, made up of numbers or alphanumeric digits, that is used to track invoices and organise your payments.

Organising invoices

One of the easiest ways to keep on top of and organise your invoices is by using the invoice number. It is a simple way to identify an invoice quickly so that you can stay on top of your bookkeeping by keeping track of the status of particular invoices.With an accounting app like Ember, you can instantly locate your invoice by searching for the invoice number. Digital formats are fast to create, easily tracked and convenient to identify. This is especially the case if you are looking for a specific invoice.

Tracking income for accounting and tax

It is essential to track your income for accounting and tax purposes accurately. A clear and easy to use invoice numbering system helps you to do this.Organising your invoices can help you track who you have billed and how much income you have received. You will need to know this to help calculate other areas of your business finance, such as your cash flow and profit and loss statement.Depending on how you choose to create your invoice number (we break down the methods below), it can also show you how many invoices have been sent out in a given period and for how much.When it comes to tax season, it's crucial to be able to quickly locate all the information you require in a convenient and straightforward manner. Again, it's with the unique identifying invoice number that you can keep organised and track your invoices as and when you need them.

Tracking payments

Similarly to the above, easily tracking your payments is one of the best ways to keep your invoices organised.Using an explicit numerical or alphanumerical unique identifier is a much easier way to distinguish between each of your invoices instead of relying on job details or customer information.Unlike invoice numbers, additional customer information isn't necessarily unique, which could result in mistakes or duplicate invoices. Not only could this cause delays to your payments and unnecessary confusion for both you and the customer, but this could risk looking disorganised and unprofessional.

Invoice number format

When generating a professional invoice, there is no hard and fast rule for the format of your invoice number. The invoice number sequence you choose is entirely down to your personal preference and what makes the most sense for your business needs, but there are a few things to keep in mind.Firstly, when you start using a specific format to assign invoice numbers, make sure that you stick with it for consistency and to avoid unnecessary mistakes down the line. Secondly, avoid generic terms that can be easily duplicated or misunderstood and thirdly, use a format that you can easily file.The most common invoice number formats are sequential, chronological, customer number, project number or by name and number.

Sequential numbering

The sequential number format is one of the most popular ways to produce your invoice number. It is a numerical invoice number that typically consists of four digits, but the total number of digits used is entirely down to you. The value of the next invoice number increases by one with every invoice that you produce, for example: 1000, 1001, 1002, 1003, 1004, 1005, etc.With sequential invoice numbers, you can track how many invoices you have sent out in a given period and for how much. This is a popular choice of format because it is one of the least likely methods on which to make a mistake or duplicate accidentally. The invoice number is completely unique to that invoice.With Ember, we automatically generate your invoice number using the sequential method; we also automatically calculate the pricing and the VAT.

Chronologically

The chronological format is similarly another popular format to use when producing your invoice numbers.For this method, you would typically include a date as well as a unique numerical code, for example: 20211907-1001, 20211907-1002, 20211907-1003, 20211907-1004, 20211907-1005.The first eight digits show the date, stating the year, the day and the month. The next four digits follow the same format as the sequential method.

Customer number

You might choose to assign each of your customers or clients a unique number as a way to identify them. Some people choose to incorporate this into their invoice number.For example: 11-1001, 11-1002, 11-1003, 11-1004, 11-1005.If you assign your client "John Smith" with the number 11, then the first part of the invoice identifies the client, and the second half follows the sequential method.

Project number

Similarly to the above, the project number is based on the number you assign to a specific project. This number is unique to the project, and all the invoices linked to that project are identified with this number.For example: 300-1001, 300-1002, 300-1003, 300-04, 300-1005.This numbering system has been formulated by assigning the project the number 300. After that, the four-digit numbers increase with each invoice that is sent out.

Name and number

The name and number method is another way to create an invoice number. This is made by combining the name and number to produce a unique invoice number.For example: JSmith1001, JSmith1002, JSmith1003, JSmith1004, JSmith1005The first part of the invoice number is the customer's name, and the second part uses the sequential format.

How to make invoice numbers

Creating an invoice number can be a simple process. The most important thing to remember is that the number, however you have decided to present it, must be clearly visible and easy to understand.Fortunately, Ember can automate the invoice you need to send out to your client in seconds. All you need to do is select your client and input the service that you provided and then approve for sending. We'll also create the invoice number for you and will save a digital record within the app.Using Ember will help reduce errors such as accidental duplications and can help keep your invoices consistent and organised. Our easy-to-understand process of creating, sending and tracking your invoices will keep you ahead of the curve when it comes to invoicing and payments.Remember that when you have chosen a format to create your invoice numbers, stick to it to avoid errors, accidental duplicates and unnecessary confusion for your accounting.

Invoice number errors

We are all human, and occasionally we will make mistakes. There are several invoice number errors that may occur, such as a typing mishap, a spelling mistake or even just accidental human error.Correcting these issues can be time-consuming and sometimes problematic, so it is advised not to cancel, delete or edit an error on the first invoice sent out. Instead, it is better to send out a new invoice altogether and to add a note to the correct invoice explaining the correction that has been made. This means that you will have a record of the mistake, and anyone in your team should be able to pick it up.

How long should I keep invoices for?

When it comes to your invoices, HMRC recommends that you keep them for six years from the end of the last financial year they relate to. They are able to request any of them from this time period.It's handy to keep a record of them for accounting and tax purposes. Your invoices are part of your proof of sales and income and are needed for several other aspects of your overall business accounting. With Ember, you can feel confident that all of the valuable information is stored in a secure place and can be requested at any moment.

Summary

So there we have it. Invoice numbers play an essential role in your invoices and can help you to track and organise your payments and income. As an Ember user, you can utilise the embedded invoicing software within our handy app to quickly and accurately create and send invoices on the go.

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