Simply put, an invoice number is a unique record number assigned to each invoice you create. When issuing an invoice, you can manually create one, or the number can be automatically generated by invoicing software.
Working as a freelancer or small business owner is a dream for many. A recent survey by Vistaprint found that almost two-thirds (62%) of respondents wanted to be their own boss.
If you're freelancing or helping a small business thrive, then congratulations! You're living the dream. The trick to being a boss? Make sure you're also getting paid like a boss. An invoicing system is a simple but important tool to help you do just that.
Why is an invoice number important?
Beyond the fact that an invoice number is a legal requirement, there are at least 2 other essential ways they help your business succeed.
An invoice number helps you get paid faster
A professional and organized invoice can work wonders for your business. Even something as simple as a clear invoice number format is one of the invoicing basics that can ensure you keep the payments coming in promptly, They encourage repeat business, too.
For example, some companies can't process an invoice without an invoice number – causing a delay to your payment. Clients will not appreciate a cluttered or hard-to-read invoice. If you submit the first invoice with an invoice number or other essential contact information, your money could also get misrouted or lost.
Invoice numbers help you stay organized and avoid stress at tax time
Beyond helping you get paid faster, having a straightforward invoice number system helps you at tax time and if you are ever audited. You’ll have clear records of all your transactions and will be able to share any documentation easily.
Therefore, an invoice number and a logical invoice number format will reduce your stress as a business regardless of the accounting system you use.
How should invoices be numbered?
Invoice numbers are mandatory and should be assigned sequentially. In other words, the number of each new invoice should increase. You must number invoices consecutively for legal reasons – numbers should never repeat, and there should never be gaps between numbers.
How many digits are in an invoice number?
It's not recommended to number invoices with single digits (1, 2, 3, etc.). The best practice is to use three or four digits – for example, 1001 instead of 1 – to avoid any confusion as your business and client base grows.
How to quickly generate an invoice number
To create invoices, invoicing software can do wonders for your business. It's one of the best practices that small business owners swear by.
Going through old invoices to sort sequential numbers or re-do an invoice numbering system with a mismatched invoice number after that fact can be a nightmare.
Even if you don't have a lot of clients or customers yet, invoicing software and on-brand invoices can make you seem to be more established and professional – and save you a lot of time in the long run. Here are some steps to follow from your first invoice on!
1. Choose an invoice template
An invoice template makes it easier for you to organize the appearance of your invoice, so your clients can find all of the information they need and keep track of future invoices you send.
An invoice template also gives you the opportunity to reinforce your business brand with your company logo and a design that fits your brand and the type of business or services you offer.
The invoice template keeps invoice numbers in the same spot for quick scanning. Want even more control? You can choose between digital and paper invoices and keep track of everything using the mobile app.
2. Select a sequential invoice numbering system
To choose a system with a logical approach to invoice numbers, first consider:
- The volume of invoices you expect to send
- The volume of invoice numbers you expect to assign
- The invoice number format that fits your industry (for example, construction companies may have a unique invoice number format)
- Whether numbered invoices or a mix of letters and invoice numbers will work best for you
- Whether the invoice number system is differentiated enough from other numbers you track
If you anticipate having a high volume of invoices, make sure to choose a numbering system with invoice numbers that will allow you to grow over time.
For example, you can number invoices with a five-digit number (such as 00001 for your first invoice number, then 00002, and so on), which will allow you to keep assigning invoice numbers. You'll also have a sequential invoice approach to follow as you get more payments!
Using letters is another way to help organize your numbering method. Letters can be code for the types of services, like G for Graphic Design and C for Copywriting, or you can code for the type of business the invoice is for.
When you number an invoice, a unique invoice number should be assigned to each time!
3. Make sure everyone understands your invoice numbering system
It may seem basic, but if you have employees, partners, or colleagues involved in your invoicing, make sure your invoice number approach is crystal clear. For people who will be working with your invoice numbers, include them in the discussion so you have a shared agreement.
You may also have people who need to understand your invoice number system, including your accountant, especially if you are adding business services or changing your business altogether.
If your spouse or significant other helps with your invoice numbers or payment processing, even if it's only occasionally, make sure they are up to speed on what you're doing and can assign invoice numbers in the same way that you do.
4. Generate your invoice
With an invoice generator, you can create a new invoice in moments. With the template, you can begin filling in invoicing basics that will stay the same on every invoice, like your website, phone number, and email address.
Next, fill in the items that will usually stay the same but may change with specific clients, such as payment terms. From there, you can add in items that will vary from invoice to invoice, like the invoice number sequence, client number, and project number.
5. Check your invoice
Make sure to check your first invoice with the invoicing software carefully. Invoice number errors or having the wrong customer number can throw off your client's system as well as your own.
Also, check to make sure your business transaction terms are spelled out; the more detail about the business and work you offer, the better. Remember, your invoicing process is one way to appear professional to clients and vendors.
6. Send your invoice
Once the invoice is done, it's time to get paid! Sending your invoice is a snap with Invoice2go. You'll be able to track the progress of your invoices, search for specific invoice numbers, and make payment collection one less thing you have to worry about.
A professional invoice system makes it much easier for your clients to manage payments on their end, too. Small business owners all have horror stories of wanting to pay someone for their good work but needing to follow up time and time again to get more details or update the invoice.
With a specific and logical invoice number system, you can grow and expand without restructuring your invoice number approach. You can send invoices in seconds, either from a desktop or a mobile device.
Best practices for when you assign invoice numbers
The invoicing basics are simple enough, but there are some pitfalls to watch out for. Seasoned small business owners have often learned these invoice lessons the hard way, but we're here to help you learn from their experience!
1. Be sure to use a professional invoice number format
Invoices and invoice numbers are important tools, so this is not the place to be quippy or cute. While you do want your invoice numbering system to act as a code if you need it, you don't want to create an invoice number using funny phrases.
Invoice numbers like YouDaBomb102 or MyBizRules06 look amateurish at best. They can also be hard to process or keep track of in accounting software or programs like QuickBooks. If you use phrases for invoice numbers, it will be more challenging to have a sequential number for the next invoice, and you'll have a tougher time assigning invoice numbers that will stay organized over time.
Keep your invoice numbers logical and straightforward, and leave the gimmicks behind.
2. Ensure your invoice number won’t get confused with other numbers
Make sure your invoice numbers do not get confused or mixed up with other types of numbers you keep track of, like customer number or project number. Invoice numbering should be a system in which each number is a unique identifier — not just for invoice numbers, but all forms of business tracking.
Depending on the type of business you have, you may assign invoice numbers yourself and use the customer number that your customers provide (such as their tax ID). If not, just make sure you have an easy way to separate them, like using a combination of letters and numbers when you assign invoice numbers and a numbers-only approach for customer numbers.
3. Make sure every invoice number is a unique one
What if you started a business on your own and then partnered up with a friend to double up on what you offer? Should you use their invoice numbers or yours? What if you had one type of business but then decided to change your services? Should you scrap your invoice numbers altogether and start fresh?
It's best to speak to an accounting professional about what to do with invoice numbers from prior businesses. There could be tax or legal consequences from switching your invoice numbering system around, so you'll want to assign invoice numbers with that in mind.
Other invoice tips for small business success
With the basic invoice number pitfalls out of the way, you can beef up your business and keep living your best freelance life with these tips.
1. Get your invoices set up right the first time
As the saying goes, "Measure twice, cut once." Invoicing software and Invoice2go services can help you create professional invoices and then move on to what you need to be doing.
By spending some time upfront to set up a logical invoice numbering system and choosing invoice numbers that allow you to maintain sequential numbers even as your business grows, you'll be well-positioned for future payments and prosperity.
There are so many other things to keep track of when it comes to your business that it can be a load off your mind to know your invoice numbers are organized, your invoices are easy to send, and you can create a new invoice without overthinking it.
2. Use your invoices to remind clients why they hired you
Invoices are excellent marketing and branding opportunities. The logo, brand design, and contact information on your invoice are additional touchpoints that your customers or clients will see.
You can detail out your invoice in a way that reinforces their decision to hire you, too. For example, a web developer who offers complimentary design consultations upfront can remind the client of this service on the invoice: Web Development = $2,000; Professional Design Consultation = (complimentary service).
3. Managing business transactions beyond the invoice number
Small business owners and freelancers wear many hats. You may create an invoice template one moment and then solve a client crisis in the next. You may send an invoice to a client on your phone while also making dinner for your family.
With everything you need to keep your mini business empire running, it can be easy to get bogged down in the details. Invoice2go can help relieve you of some of those details, with basics like an invoice number system and invoicing management. We can also remind you what you're doing it all for!
Each invoice represents the blood, sweat, and tears you've devoted to your company. With every new invoice number, you're getting confirmation that people value you, want to work with you, and love what you do. And on every invoice, there's a reminder that nearly two-thirds of people wish they could be doing what you're doing.
With these best practices and a professional invoice number system, you're set to keep payments rolling in. You're also set to keep living the dream!
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