× Freshbooks App Logo
FreshBooks
Official App
Free - Google Play
Get it
5 Min. Read

What Is the Invoice Number? Invoicing Basics Explained

An invoice number is a unique number generated by a business issuing an invoice to a client. This number is included on the invoice and it is used for payment tracking purposes. When the client makes payment, they will reference this number to show that the funds are for that particular invoice.

Here’s What We’ll Cover:

What Is an Invoice?

Why Is an Invoice Number Important?

Do Invoices Need an Invoice Number?

What Invoice Number Should I Start With?

What Is the Difference Between Invoice and Receipt?

What Is an Invoice?

An invoice is a bill. It is a list of products or services provided to a client that must be payed. An invoice is issued by the seller (or vendor) towards the end of the transaction process, when the product has been delivered or the service has been provided.

An invoice details the previously agreed upon price that the buyer should pay now that the order has been completed.

A proper invoice should include:

  • Date
  • An invoice number
  • Vendor contact name, company name, address, phone number, email
  • Client contact name, company name, address, phone number, email
  • Purchase order number (For more on purchase orders, please see “How Purchase Orders Work”).
  • Description of products or services being charged for, including prices and quantities
  • Date products were delivered or services were provided
  • Subtotal
  • Taxes
  • Grand total
  • Payment terms (when payment is due)
  • Late fees warning
  • Payment options

Why Is an Invoice Number Important?

Invoice numbers are important because it provides a way for a business to track not only whether payments have been made or not, but by who.

Let’s give an example. Hollywood Limousine Services issues 50 invoices in the month of September. By December, HLS can tell 45 of those invoices have been paid. They can tell this because each client has referenced the invoice number with their payment. Now all they have to do is follow up with the five remaining clients who have not paid their invoices.

Do Invoices Need an Invoice Number?

Invoices do need an invoice number. Often clients will reject invoices that do not provide one, because it makes it impossible or difficult to track payments. This means the vendor has to spend time reissuing the invoice.

What Invoice Number Should I Start With?

Invoice numbers are entirely up to the business that’s issuing the invoices. There are no federal laws or state financial regulations regarding what a company’s invoice numbering system must include. Here are some best practices:

Use an Identifier

Let’s use Hollywood Limousine Services again in this example. The accounting department for the company wants a unique identifier, so they have decided to use the first letter of each word in their name to start every invoice number. As such, it reads as “HLS0001”.

If you’re invoicing a company that has a large number of vendors, then this type of numbering system can separate you from all the others who are just using “0001”, in case you later need to track payment.

An alternative is to use a client number as an identifier. If your business is larger and every client has been issued a client number, you could create an invoice that way. For instance, if Hollywood Limousine service is issuing an invoice to client #742, the invoice number would be “742-0001”.

Lastly, you could just use the date the invoice was generated. For instance if HLS issued an invoice on December 18, 2018 to a client, the invoice number would be “121818-0001”, or if they wanted to use a combo date/client number system, the number would be “121818-742-0001”.

Make Every Number Sequential

You don’t want to make up a number, like “HLS0009” for your first invoice. Start with “HLS0001” and take it from there. Every time you issue a new invoice, it should be the next number in the sequence, in this case “HLS0002”.

Use Invoicing Software

Most accounting software you will find online will automatically generate invoices for you, with fields for you to enter the proper information. The software will generate an invoice number too, which you are free to go with or change. Keep in mind that for tracking purposes, invoicing software will tell you when a payment is overdue. At that point, you can easily reference the invoice number for when you reach out to the client to check on payment status.

Never use an invoice number twice, even if your invoicing different companies. Accounting software will help you to ensure that does not happen.

What Is the Difference Between Invoice and Receipt?

An invoice is issued by a vendor to notify a client that payment is due.

A receipt is also issued by the vendor to show that payment has been made.

Typically, an invoice does not require a receipt. Let’s explain with examples.

Tom’s Coffee provides coffee delivery to a number of businesses in the San Diego area. He issues a client, Sal’s Surf Cafe, an invoice for $842.00. According to the terms, Sal is required to pay Tom within 30 days. Sal does make payment within 3 weeks, in the form of a check to Tom. Tom cashes the check. At that point, if there’s any discrepancy about payment, Sal can just confirm with his bank that Tom cashed the check. A receipt is not necessary.

Let’s use another example. Tom’s company doesn’t issue an invoice at all. Instead when he arrives at Sal’s Surf Cafe and delivers the coffee, Sal pays him in cash right then and there. Tom would then issue a receipt, which shows that the goods have been paid for.

RELATED ARTICLES

Save time Billing and Get Paid 2x Faster with FreshBooks

Try FreshBooks Free