Invoice number: meaning and examples

In the UK, VAT-registered businesses must follow specific legal requirements when issuing invoices, including using a unique and sequential invoice numbering system as per HMRC regulations. Even if your business is not VAT-registered, having a structured invoicing system is highly recommended for effective record-keeping.

What is an invoice number, and what purpose does it serve?

An invoice number is simply a way to uniquely identify an invoice, helping businesses track transactions efficiently. Using a structured invoice numbering system ensures that each invoice is unique and that financial records remain organised and easy to reference—both for accounting purposes and customer support.

Even though invoice numbering isn’t required for all types of businesses, omitting invoice numbers can create challenges in tracking transactions and verifying financial records. Poor bookkeeping practices, such as missing or duplicate invoice numbers, may raise concerns about accuracy during an HMRC audit. If records are incomplete or inconsistent, tax authorities may review transactions and require additional supporting documents.

If you conduct business with clients in countries that have stricter invoice regulations, ensuring that your invoices follow a proper numbering system is crucial. Taxation and VAT laws vary by country, and having a compliant invoice structure can help you and your customers avoid potential legal or financial complications.

How to generate an invoice number

For VAT-registered businesses in the UK, HMRC prefers invoices to have a unique and sequential number to maintain compliance. If your business is not VAT-registered, you have more flexibility in how you assign invoice numbers, but it’s still best practice to use a logical and consistent system for easy record-keeping.

The key is to ensure that invoices are easily searchable, logically structured, and that there are no duplicate or missing numbers. Avoid frequent format changes, as this could raise questions in an HMRC audit.

Here are some examples of the most common invoice numbering methods:

• Sequential numbering (e.g., 1001, 1002, 1003)
• Chronological numbering (e.g., YYYYMMDD-001)
• Customer-based numbering (e.g., CustomerID-0001)
• Project-based numbering (e.g., ProjectID-0001)

Sequential invoice numbering

Most accounting software defaults to sequential numbering, starting at ‘1’ and increasing numerically. However, you can customise the starting point if needed.

For example, if you want a five-digit invoice number and specify ‘10000’ as your starting point, your invoices will progress like this:

When recording invoices, it’s helpful to include the customer’s name and the invoice amount for easy reference. However, if your business handles a large volume of orders or has repeat customers, sequential numbering alone may become difficult to manage.

Chronological invoice numbering

Formatting invoices by date allows for easier tracking based on when the order was placed. An invoice generated on May 23, 2025, for customer 4602, might be formatted like this:

23052025-4602-00

Here’s what each segment means:

• 23052025 → Date (DD/MM/YYYY format)
• 4602 → Customer number
• 00 → Sequence number (increments if multiple invoices are issued to the same customer on the same date)

If you issue multiple invoices on the same day to the same customer, the next invoice would be numbered:

23052025-4602-01

Customer-based/project-based invoice numbering

This method starts with the customer number, followed by an optional date and a sequence number.

Examples:

4602-PERF3847-01 (Customer number → Project number → Sequence) PERF3847-4602-01 (Project number → Customer number → Sequence)

Choosing the right invoice numbering system

The invoice numbering format you choose should align with your business operations, ensuring invoices are:

• Easy to locate
• Well-organised
• Unique and traceable

Regardless of the format, the sequence number should always be placed last to simplify tracking and prevent duplication.

Most accounting software includes an invoice number generator to automate the process and prevent errors. Using a structured invoice numbering system will help keep your financial records organised, avoid duplicate invoices, and improve overall business efficiency.

What to do when there’s an error with the invoice number?

Mistakes or incorrectly numbered invoices can be problematic and may result in duplicate payments or accounting discrepancies. Correcting these errors promptly is essential for maintaining accurate financial records and avoiding potential confusion or costly consequences.

Correcting an invoice number error

Minor typos in company names or descriptions do not typically require correction, but invoice number errors must be addressed properly. Since finalised invoices should not simply be voided, deleted or modified, the recommended approach is:

1. Issue a credit note referencing the incorrect invoice and explaining the correction.
2. Issue a new invoice with the correct invoice number.
3. Send both the credit note and the corrected invoice to the customer with a brief explanation.
4. Keep records of the original invoice, the credit note, and the new invoice for auditing and compliance purposes.
5. If the invoice has already been paid, apply an adjustment on a future invoice or issue a refund via the credit note, if applicable.

Preventing invoice numbering errors

To reduce the risk of invoice numbering mistakes, it is recommended to use accounting software with an automatic sequencing system, which helps prevent duplicate or missing invoice numbers. Another effective measure is to implement a monitoring tool that flags any duplicate invoice numbers that have been generated before they are finalised. Double-checking invoices before sending them out ensures correct numbering and avoids unnecessary errors.

Please note the legal disclaimer for this article.