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Business Invoicing 101: Why You Need an Invoice Number

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Christina Bosch
Christina Bosch
4 min read
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For the busy business owner, the number of to-dos can feel never-ending. Especially in the early days, it’s easy to let big-picture problems monopolize your time. In a hyper-competitive environment, prioritizing business-defining elements is important.

However, there is one seemingly-small ingredient you’ll need to add early on to nail the recipe for success: invoice numbers. 

At first glance, invoice numbers may seem like the least important part of getting paid. But in reality, nothing could be further from the truth. Let’s take a look at why adding invoice numbers is a crucial step to keeping your business on track.

Invoice numbers help you stay organized

When creating and sending invoices to clients, it can be tempting to keep it bare bones: all you really need is the amount owed and the date issued, right? 

Well, no. Adding an invoice number is a crucial step in keeping everything organized. With an invoice number added, easily track payment status, organize your jobs more effectively, and have a system in place that will keep your sanity in check when it’s time to do your taxes. 

Depending on how you choose to format your invoice numbers (more on that later), using them to track your work throughout the year can also help you understand when your busy season is, which clients bring in the most income, and which projects were the most prosperous (or problematic).

Invoice numbers get you paid on time

For most businesses, late payments are a nuisance. For a small business, they can threaten the very livelihood of your organization. Unfortunately, in the United States, 39% of invoices are not paid on time. And while it can be tempting to blame this trend on careless clients, incorrect invoices actually lead to 61% of late payments

Luckily, there are ways to prevent this. First, double-check your invoice to make sure the amount, date, recipient, and tax amount are correct. Without an invoice number, though, you’re setting yourself up for mistakes to be made.

Having an invoice number comes in handy when it’s time to send payment reminders or follow up on payment details with your clients. Plus, when you get to a point where you have multiple invoices to track—some with similar amounts that could have been sent out around the same time—an invoice number is what will allow you to identify each individual invoice and provide a reference point if there’s any confusion.

How to format invoice numbers

In order to properly track your invoices, you’ll need to make sure each has its own unique number. There are a few different approaches you can take here. You can choose to number your invoices chronologically, sequentially, or by customer or project. Let’s take a look at how each format works.

Sequential Invoice Numbers:

Sequential invoice numbers are the most straightforward option. This is the best option for side-hustles, businesses with smaller client bases, and on-the-go projects. and businesses without a huge number of clients or projects on the go. Here, you can start from 1 and continue upward.  potentially continue on a

Generally, it’s considered best practice to go with a 4-digit or larger number (starting with 0001, for example) to make sure you give yourself lots of room to grow as time goes on. 

Chronological Invoice Numbers:

Chronological invoice numbers add an element to denote the date. For example, an invoice sent on Valentine’s Day 2022 would have an invoice number like 20220214-0012. 

Adding the date to your invoice number allows you to start from 1 at the beginning of each calendar year, which makes it easier to sort and track your invoices over time (and be less likely to run out of numbers to use).

Customer Invoice Numbers:

Customer invoice numbers allow you to assign a number or letter code to each customer to easily group invoices by the client. For example, if you had a customer named John Smith and he was the fourth client you ever signed on, you could label his invoices as JS-0001 or \: 4-0001. 

Grouping your invoice numbers by client allows you to easily analyze which clients are most and least valuable to your business. It also ensures nothing gets missed if your client ever needs anything for their records.

Project Invoice Numbers:

Project invoice numbers are similar to customer invoice numbers in that they allow you to assign an alphanumeric code for each project. Unlike customer invoice numbers, though, project-based numbers allow you to get more granular with how you’re organizing your jobs. 

This kind of structure comes in handy if you have a few clients with a large number of tasks. For example, a freelance writer might be working on website copy, an e-book, and social media posts for the same company. To keep these ongoing jobs separate, they could assign WC, EB, and SM respectively to each ongoing invoice, and then send each when that particular project has ended.

In Conclusion:

No matter how you choose to structure your invoice numbers, the most important thing is to have them as an invoicing best practice. This is something you’ll have to remind yourself to include if you’re completing your invoices manually. If you’re using invoice software, however, invoice numbers are generated automatically, so you don’t have to worry about getting them right.

Want to try invoicing software for yourself? Generate and send invoices from your phone or desktop to create streamlined billing in seconds. Learn more about GoSite payments here

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