Invoices are an essential part of running a small business. They’re a key step to earning money from products or services you sold to clients. But you may not realise that each invoice must have an invoice number associated with it. Invoices help you organise and maintain your financial records. But what is an invoice number?
This guide will discuss invoice numbers, including:
- What is an invoice number?
- Why do invoice numbers matter?
- How can you manage your invoices for better finances?
What is an invoice number?
You may know that an invoice is a document or bill that requests payment for goods or services you sell through your business. It’s a critical step to earning money for your small business. Small businesses must keep their invoices as records of their financial transactions for about six years. But you may not realise that all invoices must have a number attached to them that organises and situates that invoice within your bookkeeping.
An invoice number is a unique sequence of numbers or code that gives each invoice an identity and assigns it systematically within your business records. Each document should have a clearly identifiable number at the top without any repeats or gaps. So, each time you create and send a new invoice, it earns its own number that assigns it to a client, time, and number within your transaction record.
The invoice number often includes more than just numbers to make it easier to locate each one. This number could also contain symbols such as dashes or slashes to separate the sections. The invoice number could also have letter codes to separate the different types of documents.
Why do invoice numbers matter?
Once you understand what an invoice number is, you may wonder why it’s so important to small business finances.
Managing your financial records
Invoice numbers are crucial for organising your business earnings within an identifiable system. In fact, invoices are only considered legal documents when they have an invoice number. So, an invoice number system helps you correctly document your earnings for your financial accounting and tax process.
Aside from being a mandatory practice, this system allows you to follow your business transactions closely and spot overdue payments. As a result, you can understand how well your business is performing and track your cash flow, or the money flowing in and out over a set time.
You can easily find that invoice using your number system. So you can quickly find proof of a transaction or check if your client has paid you. Plus, if you notice a pattern of clients paying invoices late, you can adjust your process to remind customers of payment terms.
Avoiding gaps within your invoice numbers
If you miss a number or delete an invoice, this error will create a gap within your financial records. Since you must keep accurate records for your financial accounting, you will need to be consistent with your invoicing system.
If you wish to change your numbering system, you can do this at the beginning of a new quarter, so you don’t mess up the current method. If you want to delete an invoice, you’ll need to mark this transaction within your records to avoid creating a gap.
How can you manage your invoices for better business finances?
So, invoice numbers are essential to your invoicing process. But how can you manage that process well for better finances?
Creating your invoice number system
First, make sure you have a well-established invoice system. With a structure in place, you can number each of your invoices correctly, avoid mistakes, and easily navigate those records.
To avoid invoices with the same numbers, you could label them with increasing numbers, such as 1, 2, 3, 4, 5 etc. But, as the numbers grow, this process may make it challenging to find invoices when you need them. Instead, you could choose to label each invoice with codes that specify them more clearly.
One option to consider is assigning each client a code and numbering each of their invoices sequentially. For example, you could choose to use a client’s company name or initials next to a number. This arrangement might look like DTV-0001, DTV-0002, and so on.
You could also assign each of your services a code and add a date beside that code. For example, this method might look like CPK-01-22-22-01. This organisation provides the most detailed information to locate the invoice in the future. You’ll only need to organise the invoices properly.
Using modern accounting software
Accounting software will help you create an invoice system to easily track your records. Software like Countingup lets you create invoices and send them to clients. Countingup is a business current account with built-in accounting software. Unlike most options, the app allows you to create and send unlimited invoices on the go. Plus, the Countingup app simplifies the process by automatically numbering your invoices so you don’t have to.
Countingup helps you digitise your invoicing records and automate the process with a few simple taps. You can even duplicate already-made invoices and add your business logo to make them professional and unique. The app will also help you track your invoices by notifying you when you receive them and automatically matching them to payments.
Invoicing in the Countingup app is straightforward and quick. You simply go to the ‘get paid’ tab, click ‘send an invoice’ and fill out the necessary details. You can label your invoice with a number and easily track them later.
Tools like Countingup help you comply with invoicing protocols so you can have clear and accurate financial records for your taxes. Plus, these records help you understand your earnings to make better business decisions.
Simplify your invoicing process and more with Countingup
Financial management can be stressful and time-consuming when you’re self-employed. That’s why thousands of business owners use the Countingup app to make their financial admin easier.
Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are.
You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward!
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