How to generate an invoice number

Every business, whether of commercial scale or small, freelance dealings advisably requires issuing invoices to facilitate transactions, purchases, booking, and maintaining records. However, an invoice is not just a piece of document that stipulates details of the transaction and the amount due. It also comprises other important elements like date and invoice number to easily track payments and transaction records.

Unfortunately, many business owners do not understand the importance of an invoice number and how it helps with record keeping and business management. In this article, Workee experts will explain the concept of an invoice number, explore its significance, and discuss how to generate one.

First, what is an invoice number?

An invoice number is like a special identification code that helps keep track of a specific invoice. It's a unique number assigned to each invoice to make it easier to organize and reference them.

Think of it as a kind of "ID card" for an invoice. Just like people have unique identification numbers like social security or passport numbers, invoices have their own special numbers. These numbers are usually created sequentially, so each new invoice gets a different number than the previous one.

The purpose of an invoice number is to provide a way to easily locate and reference a specific invoice when needed. It helps businesses keep their financial records organized and enables them to track payments, keep a record of transactions, and handle any issues or inquiries related to a particular invoice.

What is an invoice ID?

An invoice ID is just another term for describing the invoice number. Hey basically means the same thing and is often used interchangeably.

What is a PO number on an invoice?

PO number, which originally stands for a Purchase order, is different from an invoice number.

A PO number is a unique identification number assigned to each purchase order you make. It's like a special code that helps you and the supplier keep track of the transaction and make sure everything goes smoothly.

When you create a purchase order, you assign a PO number to it. This number is usually a combination of letters, numbers, or both, and it's specific to that particular order. Think of it as a reference number that helps you identify and organize your orders.

So, imagine you run a business, and you need to buy things from different suppliers. Sometimes you might order a bunch of items all at once, and it can get a little confusing to keep track of everything. That's where a PO number comes in handy.

Having a PO number on an invoice is beneficial for the transacting parties. For the buyer, it helps in reconciling the invoice with the original purchase order. It allows them to verify that they received what they ordered and that the prices and quantities match.

On the supplier's side, including the PO number on the invoice ensures that they get paid promptly and accurately. It helps them track and link the invoice to the specific purchase order, making it easier to handle payments and resolve any potential disputes.

Benefits of an invoice number

I’m sure you’ll be wondering why there is so much fuss about invoice numbers; well, if it's not important, we wouldn’t be talking about it in the first place. So here is why invoice numbering is beneficial;

1. Promotes organization and record-Keeping

Imagine you're running a business with multiple clients or customers. Each time you provide a service or sell a product, you generate an invoice to request payment. Now, without invoice numbers, things can quickly get messy and confusing.

But with invoice numbers, you can bring order to the chaos. 

Invoice numbers play a crucial role in maintaining organized financial records. By assigning unique identifiers to each invoice, businesses can easily search, sort, and retrieve information related to specific transactions. This aids in bookkeeping, auditing, and overall financial management.

2. Prevent duplicate payments and errors. 

Having a distinct invoice number on each receipt helps prevent duplicate payments and errors. When businesses receive multiple invoices from the same vendor, the invoice number acts as a verification tool to ensure that each invoice is unique. It helps accounting departments cross-reference invoices, reducing the chances of accidentally paying the same invoice twice.

3. Efficient communication and dispute resolution 

When it comes to communication, invoice numbers provide a concise reference point for discussing specific invoices. They allow businesses to easily locate and retrieve relevant information related to a particular transaction. For example, if you receive an email or a phone call from a client regarding a specific invoice, having the invoice number handy enables you to quickly find and review the details of that invoice. This streamlines the communication process, saves time, and ensures that both parties are on the same page.

In terms of dispute resolution, invoice numbers can be immensely helpful. In any business relationship, disagreements or discrepancies can arise regarding the amount charged, the services provided, or any other aspect of the transaction. By referencing the invoice number, both parties can easily track down the specific invoice in question and review the details. This eliminates confusion and ambiguity, making it easier to identify the source of the dispute and work toward a resolution. 

4. Compliance with legal and tax requirements 

For legal and tax purposes, maintaining accurate and sequential invoice numbers is essential. In many jurisdictions, businesses are legally required to include invoice numbers on their receipts and invoices. These invoice numbers provide a clear audit trail for tax authorities and can be used to reconcile financial records during audits.

5. Tracking payment status and cash flow 

Let's say you have a business, and you send out invoices to your clients. By assigning a unique invoice number to each invoice, you can easily keep track of the payment status of each one. You can mark them as paid when the payment comes in, note the due dates, or even set up reminders to follow up with clients who haven't paid yet.

Having a clear overview of your payment status is incredibly useful for managing your cash flow. You can quickly see how much money is coming in, how much is outstanding, and when you can expect to receive payments. This information helps you make informed decisions about your business's financial health and plan your expenses accordingly.

Additionally, invoice numbers can streamline your bookkeeping process. When it's time to reconcile your accounts or prepare financial statements, you can easily locate specific invoices by their numbers. 

How to generate invoice numbers

So how do you generate an invoice number? Let’s find out

1. Follow a sequential structure

Generating invoice numbers using the sequential method is a straightforward process. It involves assigning unique numbers to each invoice in a sequential order, typically starting from a specific number and increasing by one for each new invoice.

For instance, you have a business, and you want to generate invoice numbers for your customers. You decide to start with the number WR1000 as your initial invoice number. The first invoice you generate will be assigned the number WR1000.

Let's say the first customer is JKL Company, and you create an invoice for them. You would assign the invoice number WR1000 to that particular invoice.

Now, let's move on to the next customer, XYZ Corporation. Since it's the second invoice, you would increment the previous number by one, making the new invoice number WR1001.

You would continue this process for each new invoice, increasing the number by one each time. 

2. The date-based or chronological structure

The Date-based or chronological method of generating invoice numbers is a simple and straightforward way to assign unique identifiers to your invoices based on the date they are generated. It involves using a combination of numbers and/or letters to create a sequential reference number that reflects the date of the invoice.

Here's how it works; 

You start by setting up a format for your invoice numbers that includes the date. For example, you can use the format "YYMMDD," where YY represents the last two digits of the year, MM represents the month, and DD represents the day. So, if you issued an invoice on June 22, 2023, the invoice number would start with "230622."

To make each invoice number unique, you can add a sequential number to the date-based prefix. For instance, if you issued three invoices on June 22, 2023, the invoice numbers would be "230622-1," "230622-2," and "230622-3." This helps differentiate invoices issued on the same day.

You may also use customer identifiers to generate the invoice numbers. So if customer A is identified as XI, the invoice number would be as follows; 230622-XI

3. Customer-based method

The Customer-Based Numbers method of generating invoice numbers is a way to create unique identification numbers for invoices based on customer information. It's designed to make it easier to organize and track invoices for different customers.

Instead of using generic sequential numbers for all your invoices, you incorporate customer-specific information into the invoice number. This allows you to quickly identify which customer a particular invoice belongs to, making it easier to manage your records.

Let's say you have a customer named ABC Company. To generate an invoice number using the Customer-Based Numbers method, you might start with a code or abbreviation for the customer, such as "ABC." This ensures that the invoice number will be unique to that customer. You may also add other numbers or identifiers to make the invoice number specific to a particular client and purchase.

4. Project-based structure

The project-based structure method of generating invoice numbers is a way to organize and track invoices by associating them with specific projects. Instead of using generic sequential numbers for all invoices, this method assigns unique identifiers that reflect the relevant project.

Imagine you have a business where you provide various services or products to different clients or projects. With the project-based structure, each invoice number will contain specific details that make it easier to identify the project.

Let's say you are a software engineer offering various web and software development services; invoice numbers for your software development services may begin with the prefix; SD. App development services may begin with; AD and so on.

5. Software-based solution

When it comes to generating invoice numbers, software-based solutions offer a convenient and efficient way to automate the process. These solutions utilize various algorithms and techniques to generate unique invoice numbers that are sequential, meaningful, and easy to manage.

One such solution that can smartly automate your invoicing process is the Workee software.

Workee is a web-based business management solution that freelancers and independent professionals need to automate and streamline their work processes. The fun part is that Workee doesn’t only take care of all your invoicing needs, it also includes other important tools and resources, including;

  • No-code website

  • CRM

  • Booking and scheduling function

  • Invoice generator

  • Video call and chat function

  • Finance and tax management

Workee is the perfect Freelancers' business management hub, and you should check it out. Get started on Workee Pro to have access to every feature and tool, including invoice generation.

To conclude

Invoice numbers are an essential aspect of the invoicing process, serving as unique identifiers for each transaction. They facilitate efficient record-keeping and clear communication and help avoid errors or duplicate payments. By understanding the significance of invoice numbers and implementing effective methods to generate them, businesses can streamline their financial processes and maintain organized records of their transactions.

Ihor, CEO at Workee

Excited to start with Workee? Schedule a demo with our Manager!


Keep updated about latest industry insights and subscribe to our newsletter

Follow Us

  • facebook
  • instagram
  • linkedin
  • tiktok
  • twitter
  • youtube

This site uses cookies. By continuing to browse the site you are agreeing to the use of cookies.

Find out more here.