Table of Contents

    What Is An Invoice Number?

    Invoice Number

    Generating and referencing invoices are routine drills for sole proprietors, entrepreneurs, SMEs, enterprises, and freelance workers alike. Part of this process involves the crucial step of assigning numbers to each of these documents. Before we dive into that, it’s essential to find out more about what an invoice is.

    Different from a purchase order number, an invoice is a bill that includes the list of services or goods that a vendor supplies to its customers. These are issued to the clients once the exchange of service or goods between the two parties occurs. This bill specifies a breakdown of the services provided against individual costs followed by the total incumbent cost. 

    Invoice Numbering 101

    So what is an invoice number? This unique numeral is generated and assigned to an invoice issued by a company to a respective client. Every one of these documents must specify this number since it helps both the sender and the receiver track payments. Clients who make payments against specific outstanding bills use this number as a reference for their vendors.

    What Is The Significance Of Invoice Numbers?

    The reason why invoice numbers are indispensable to this billing document is that they help both vendors and customers track payment exchanges. They also help vendors and businesses greenlight agencies that make timely payments.

    The sole purpose of these documents is to make a payment request. This request accounts for the main difference between an invoice and a receipt. Accordingly, numbering each one helps companies obtain quicker results from vendors.

    As an example, let’s consider Acme Car Rentals. The company issues a hundred invoices in a month. Two months later, the company clears 95 of those 100 outstanding for being paid on time. They can tell the exact number of cleared invoices because every time a client makes a payment, they reference it against the corresponding number. Therefore, Acme can easily track the five unpaid bills and follow up with delinquent clients. 

    What Happens To Invoices Without A Reference Number?

    It’s customary for businesses to assign a unique number to every bill issued to clients. Customers often reject payments against documents that aren’t referenced appropriately. To reference an invoice means attaching an identifier to the bill. Lack of proper referencing leads to unnecessary and avoidable delays since the vendor has to reissue the statement.

    Customers often reject payments against unnumbered invoices because it becomes difficult for both parties to track the bills. Here’s more on how to write an invoice the correct way.

    How Do I Assign An Invoice Number?

    Assigning a number is the exclusive domain of the issuing vendor. Luckily, no federal laws regulate the generation and allocation of these numbers, meaning a business has complete freedom over the method. Here are some common examples of how enterprises generate and assign these markings.

    Make Use Of An Identifier

    Now that you’re aware of what an invoice number means, you can start thinking about generating one. There are a few ways companies use to create identifiers. Remember that using an identifier sets your company apart from other vendors that your client may already be interacting with.

    In the first instance, you can use your company’s name as a unique identifier. Let’s take the example of Acme Car Rentals. The accounting department decides to use the company’s name to set its documents apart. The easiest way they can do this is by incorporating the company’s initials in the invoice number, e. g., ACR00001.

    Invoicing your clients in such a manner lets them know instantly where the bill is arriving from. This is particularly handy for clients served by multiple vendors, helping them easily distinguish one referenced as HCR00001 from another written only as 00001.

    Alternatively, you can generate a client number for each bill. Issuing client numbers is more common among large scale businesses that have multiple and recurring customers. For example, if Acme Car Rentals has to bill Client #56, they could specify this while referencing the invoice as 56-0001.

    A final scenario is when businesses use the date the document is generated as an identifier. Let’s say a bill was issued on October 13, 2020. You can incorporate this date with an identifying number such as 101320-0001. Some businesses make a further distinction between different invoice numbers by using a client-date combo. An example of an invoice number with a client/date combo would be 101320-56-0001.

    Remember that the more precise your reference number is, the easier it’ll be to track the eventual payments.

    Sequential Numbering

    Don’t make the mistake of assigning random numbers to your billing documents. Suggesting something like ACR9842 as an identifier may not be the best idea. It’ll neither help with preventing an overlap nor with keeping tabs on the number of invoices generated.

    The most common practice is to keep your numbering sequential. If you reference the first invoice as HCR001, the subsequent document can be marked with HCR002 and so forth. This automatically sets a cadence for neat demarcation, easier tracking, and better management.

    Integrate With An Accounting Software

    When it comes to generating and tracking invoices, using software is arguably your best option. Most accounting software comes with built-in functionality for generating automated invoices when integrated into your business. Businesses are allowed to keep the automatically generated number or change it according to their preferences. Invoicing software not only shares your burden of issuing accurate bills on time but also helps with tracking on-time and overdue payments.

    You can set up reminders that notify you when the payment will be overdue and send the same to your client to prevent late payments. While sending these reminders, don’t forget to reference the correct invoice number to ensure all parties are on the same page.