What is an invoice number? Why is it important and how to use it as a payment tracker for your business?
When you operate a small business and interact with other firms on a regular basis, you’ll have a lot of expenses to keep track of.
That’s where invoices, as well as invoice numbers, come in handy. Your invoicing system can become one of your best assets for controlling the money flowing in if it follows invoice number format best practices, which are covered in detail below.
What is an Invoice Number?
An invoice is a bill that contains a list of products or services delivered to a client that must be paid. When the goods are delivered or the service is supplied, the seller (or vendor) issues an invoice at the end of the transaction process.
An invoice specifies the price that was previously agreed upon and that the buyer must pay now that the order has been fulfilled.
A proper invoice should include the date, number, vendor and client contact details, purchase order number, description of products or services, amount to be paid, and payment methods.
Meanwhile, an invoice number is a unique, sequential code that is assigned to invoices in a systematic manner.
This document also guarantees that income is properly documented for tax and accounting purposes.
They also make tracking payments and managing past-due invoices easier.
Why is an Invoice Number Important?
A unique invoice number is important because it allows you to keep track not just of whether or not payments have been made, but also of who made them.
You can check how much money you’re waiting on by easily recognizing which invoices haven’t been paid yet.
This can assist you in planning your monthly budget, determining how much cash you can expect in the near future, and determining how quickly you can expect invoicing and payment processing to be completed.
With invoice numbers, you can keep track of the invoices you’ve sent out and see which ones have been paid and which haven’t. You’ll know who to contact if you realize a client’s invoices are underpaid and past due.
How to Assign Invoice Numbers?
Here are a few easy strategies you can take to guarantee that your invoices are well-organized and easily searchable if you’re just getting started with invoicing to bill clients.
- Begin with the larger numbers
As your business grows, just ordering invoices from “1” can get difficult. For your initial invoice, start with a higher number, such as 1001.
The following invoice number should be a sequential, easy-to-remember number.
- Use alphanumeric invoice numbers
It’s possible to build a unique code that incorporates numbers, letters, and special characters like slashes (/) or dashes in addition to numbers in an invoice number (-).
- Use an identifier
You can also use the first letter of the client’s name, for instance, if your client’s name is Robinson Technology Corporation, you can come up with an invoice number starting with RTC – 1001.
- Use consecutive numbers
For your first invoice, you don’t want to make up a number like “JFK009.” Start with “JFK001” and work your way up. It should be the next number in the series every time you issue a new invoice, in this case “JFK0002.”
When Should You Update The Invoice Number?
If you utilize an invoice number series that starts with the date, be sure you change it. The invoice number ‘INV-21-02-005’, for example, includes the month and year, indicating that it is the fifth invoice issued in February 2021. ‘INV-21-03-001’ would be the first invoice of the following month, March 2021.
It’s ideal to wait until the next accounting period to completely modify your invoice number series since this avoids confusion and prevents missing or duplicate invoice numbers.
Deleted Invoice Numbers
Following a standard guideline, it is advisable not to erase invoices. Deleting an invoice can lead to a numerical gap in your financial records since invoices are numbered sequentially and removing one could disrupt the sequence.
If you wish to eliminate a transaction, it is generally more prudent to generate a credit note for the corresponding amount. This approach effectively annuls the invoice while maintaining the completeness of your numerical sequence.
Use An Invoice Software to Easily Track and Monitor The Numbers
When you contact the client to inquire about payment status, you may conveniently refer to the invoice number.
We provide invoice example with professional templates that help you create invoices and make it easier for clients to pay on time with a variety of payment alternatives.