August 12, 2022

Why do Invoices generally include an Invoice Number?

Invoice numbers are a critical part of your accounting and tax processes. Learn more details about their importance in this guide.

When most of us think about the purpose of an invoice number, it comes to our mind that it is a primary identification of the given transaction. The invoice number becomes a unique ID number to track the sale and act as a reference later when working on accounting and tax activities.

We don't usually think about invoice numbers much beyond that. But what if there were more functional attributes to them? This article explores why businesses number invoices and what is their significance.

What is an Invoice?

An invoice is a document that shows the transaction between a seller and a buyer. The invoice summarizes the transactions for a particular sale, including details about products or services sold, prices, and payment terms. Most invoices also include an invoice number and a due date.

Sellers typically raise invoices immediately after completing a sale. Some service providers also issue them in advance. It is especially if the buyer is likely to pay late or in installments rather than all at once. An invoice should include relevant information needed to process the payment on time.

A valid invoice should include the following details:

  • Invoice number
  • Issue and due dates
  • Supplier’s name, address, and contact details
  • Buyer’s name, address, and contact details
  • Description of goods and services sold, including their rates
  • Tax information
  • Payment terms
  • Late fees details (if applicable)
  • Payment details

Does an Invoice need to have a Number?

Yes, you should include an invoice number on your invoices. The invoice number is essentially your unique identifier for the transaction. Invoices are often a part of a larger accounting system and need to be specific enough to avoid conflict with other invoices.


For the accounting software to link related transactions appropriately in the database, it needs to identify each transaction. This is where the invoice number comes in handy. It can serve as a unique identifier that doesn't get mixed with any other numbers in your system.

The Importance of Invoice Numbers

Here are several reasons why your business needs to include a number on every invoice.

Simplifies tax and accounting activities

Invoices are also helpful for tax and accounting. If you have an accountant or financial advisor, they will use invoice numbers when preparing financial statements and tax returns. Invoice numbers also help you track your business income and expenses. You can also use them to generate reports to analyze your business's profitability.

Tracks Payments

The invoice number is the first thing on an invoice and appears before any other information. This is where you can start your tracking system. According to a survey, only 6% of invoices get paid within 30 days, while the rest 94% can take anywhere between 30 and 60 days.

You can use an invoice number to track whether a client has paid or not. The information allows you to follow up with clients who haven't paid yet and send timely reminders about delayed payments.

Improve Business Processes

Invoice numbers give you an easy way to organize your invoices in one place. They would not get lost or misplaced when you are trying to find them later on. This makes it easier for you to find them if needed, helps with organization, and filing them away neatly so they're easy to retrieve. Another reason why invoice numbers matter is because they make your business look professional.

Are Invoice Numbers and Bill Numbers the same?

No, an invoice number is not the same as the bill number. An invoice number is an identifying number you can use to reference a specific invoice. It is like a book title or chapter number. However, it is a common practice for businesses to use them interchangeably. A bill acts as a document that shows the money owed by the buyer.

Bills usually have minimum information as they include only the transaction amount and contact details. On the other hand, an invoice is a more detailed document that includes everything from the item description, unit price, payment information, terms and conditions, etc. A buyer gets a comprehensive breakdown of every critical detail in the transaction.

Best Practices to Assign Invoice Numbers

Here are various tips you can adopt to number your invoices.

Include Unique Numbers

When you're assigning invoice numbers, make sure each one is unique. You don't want your customers to get confused by similar-looking invoices. Similarly, you do not want to go back and fix mistakes on old invoices because the numbering system was confusing.

Include Sequential Numbers

Every time you issue a new invoice, it will have the next number in your sequence. For example, if your first invoice is 1, the second should be 2, and so on. The method can be help avoid the hassles of duplicate invoices. An example of a sequential series is ABC001, ABC002, ABC003, etc.

Use Prefixes or Suffixes

Ensure each invoice number starts with a prefix or suffix. For example, if you want all of your invoices to start with "INV," you can use "INV00001" as your first invoice number, "INV00002" for the second one, and so on. The method works well if multiple departments or teams send invoices regularly.

Use Chronological Order

It is essential to assign numbers chronologically to keep track of your invoices. That way, you can easily find the invoice you're looking for and keep them organized by the pattern you use for the first time.

Use Project Codes

Project codes can help you sort your invoices aptly if you work on several projects. Some projects may require you to issue multiple invoices because of different payment structures. For example, if you bill a client ABC for content marketing services. Your invoices can look like this, ABC-CM-001, ABC-CM-002, ABC-CM-003, etc.

Does my Business need to Update Invoice Numbers?

You may, at times, need to update your invoice numbers. It could be due to a change in the business year. If you follow a monthly system, it might make sense to reset the numbers every year to ensure invoices remain numbered sequentially over time.

For example, you may have invoice number ABC-22-07-059, which includes the company name (ABC), current year (22), the month (07), and a sequential number (059). When the year changes, the invoice in January will look like ABC-23-01-001. There also may be situations where there’s a change in your business structure or operations.

You may want to change the entire series of your invoice number. However, it is best to wait for the completion of the current accounting cycle. It will ensure consistency in information and avoid confusion.

Is it Safe to Delete Invoices?

It is generally not advisable to delete an invoice. As the invoices get numbered sequentially, there could be a gap in your records when you delete an invoice. Even if there are reasons for you to delete an invoice, you can consider alternative measures. You can add a credit note of the same amount to the system if you want to remove any transaction.

It will still solve the purpose as the invoice will get canceled in the system. At the same time, there will be no breaks and gaps in the numbering sequence of your invoices.

Bottom line

Invoice numbers serve a lot of purposes beyond just providing a numbering sequence. They enable seamless tracking of transactions, timely reminders for outstanding payments, and simplify accounting and taxation. Invoice numbers also make your business look more professional.

If you are looking for a better and faster way to process your invoices, VisionERA is an ideal option. It is a comprehensive Intelligent Document Processing (IDP) platform that allows your accounting department to process invoices with 20x speed. Ultimately, your team can focus on other critical activities that lead to your business growth.

VisionERA features an advanced AI-HI (artificial intelligence and human intelligence) collaboration that is just what your business requires to gain a competitive edge. Document-heavy businesses can reduce operational costs, which contributes to improving profit margins.

Contact us today for a free demo of VisionERA.

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