What Is an Invoice Number? Invoicing Basics Explained

An invoice number is the reference number of an invoice. Every business should assign a unique number for each invoice issued for easy tracking. As per GST law, it is mandatory to mention the tax invoice number. Also, the invoice number is crucial for accounting, tax and payment tracking purposes.

Why Is an Invoice Number Important?

Invoices are the most essential documents for any business. It is vital to keep track of invoices issued and received for accounting sales and purchases in the books of accounts. Hence, it is important to assign invoice numbers for each invoice for easy tracking.

Rule 46 of the CGST Rules deals with the contents of the invoice applicable for GST registered persons. As per this rule, the tax invoice issued must contain consecutive tax invoice number (up to 16 characters), and each tax invoice will have a unique number for that financial year. So, the invoice without an invoice number will be considered an illegal document and subject to penalty.

Also, the invoice number is a mandatory field in the following processes:

1. Creating e-invoice
2. Creating e-way bill
3. Creating shipping bill/ bill of export

Also, the invoice numbers are helpful as a reference for all the payments and receipts of a business.

Do Invoices Need an Invoice Number?

Invoices must contain an invoice number. Otherwise, clients will reject invoices, as it makes it cumbersome for them to track payments; if the vendor loses the tracking, he has to spend time reissuing the invoice.

It is to be noted that the invoice number is serially numbered for business as a whole and not client wise. This is a common mistake that new businesses or freelancers may make.

How to Assign Invoice Numbers

Invoice numbers should be assigned sequentially, which means the number of each new invoice should increase. An invoice number sequence should never consist of repeats or gaps.

It is not good to assign simple invoice numbers such as ‘1’, ‘2’, ‘3’, etc. This activity can be confusing when invoice numbers reach double or triple figures. Newly started businesses may not have large numbers of invoices in the beginning. Still, it is essential to consider future growth while choosing an effective invoice numbering system.

An effective way to create a longer, more specific invoice number includes the month or year when the invoice was issued. For example, within a sequence that refers to the year, the first invoice in 2020 could be ‘200001’. The subsequent invoices would be ‘200002’, ‘200003’, and so on. At the start of a new year, one should reset the invoice numbers, i.e., the first invoice number of 2021 would be ‘210001’. Also, one can mention the invoice number mentioning the month and year, such as INV/2020-21/01/09, where 2020-21 is the year, 01 is the month, and 09 is the serial number.

This yearly system allows you to quickly see which year an invoice is issued and follows the sequential numbering requirement. Also, a business can use the name of a business unit or project as a reference for invoice numbers.

Invoice Numbers with ClearOne

ClearOne comes with multiple invoice templates to choose your own custom invoice number series according to your business requirements. The invoice number will automatically be updated to the following sequential number whenever you create a new quote or invoice.