Invoice numbering, and why a gap is a problem
Invoice numbers look like the least interesting thing about an invoice. They are also the part most likely to cause a problem you cannot fix afterwards, and the rules are short enough to learn in five minutes.
Unique and sequential
Every invoice needs a number no other invoice has, and wherever VAT or GST is charged the rules usually go further and want that number to run in an unbroken series.
The wording is worth reading once, because it barely changes at the border. Ireland's VAT regulations require a sequential number, based on one or more series, which uniquely identifies the invoice, which is the European rule as a member state writes it down. The UK left the EU and kept the sentence: a VAT invoice there shows a sequential number based on one or more series which uniquely identifies the document. Same requirement, same phrasing. Sell into three countries and you are usually being asked for one habit, not three.
Not everywhere writes the sequence into law. Some countries ask only that the number be unique, and if you are not registered for VAT or GST the tax wording may not reach you at all. It changes very little, because the reason behind the rule is auditing and an audit happens either way. A gap suggests an invoice was issued and then made to disappear. An auditor seeing 0101, 0102, 0104 has one question, and "I deleted a draft" is an answer you have to be able to evidence rather than assert.
The uniqueness half is obvious once you have had two invoices carrying the same number. The sequence is the half people find arbitrary.
The format itself is mostly yours. Plain numbers, a year prefix, a customer code, whatever suits, as long as it is consistent and it runs in order. What has to be on the invoice is prescribed; how you number it largely is not.
Assign the number when you issue, not when you start
This is the rule that prevents most gaps.
If a number is allocated the moment you create a document, every abandoned draft burns one. Start an invoice, get called out, never finish it, and 0103 is gone. Do that a few times a year and your sequence is full of holes that each need an explanation nobody wrote down at the time.
Allocate on issue. A draft has no number until it becomes an invoice, and then it takes the next one. Some software gets this wrong by default, so it is worth finding out which yours does before you have a year of it.
Cancel, do not delete
You sent an invoice and it was wrong. The instinct is to delete it and send a corrected one.
Do not. Deleting removes the record of a document that somebody else is still holding, and it leaves exactly the gap the sequence exists to prevent.
Instead cancel it, so the number still exists with a reason attached. Two ways, depending on what happened. A credit note is a document that formally reverses all or part of an invoice, takes its own number in the sequence, and is the right answer once an invoice has been entered into somebody's accounts. A void marker is simpler and suits an invoice that never went anywhere: the number stays, the document says void, and there is nothing to reconcile.
Either way the audit trail reads as a sequence of decisions instead of a sequence with something missing from it.
Two devices, one sequence
This is the modern version of the problem and it is easy to walk into.
You issue an invoice from the phone in the van. Your partner issues one from the laptop at home. Neither knows about the other, both take the next number, and now there are two invoices numbered 0104 going to two different customers. You will find out when an accounts department asks which of them they are supposed to be paying.
The fix is that something has to hand out numbers, rather than each device guessing. Any system that allocates centrally solves it. Any system where each copy keeps its own count does not, however careful everybody is, because the failure needs no carelessness at all.
Prefixes, which help more than they should
Separate sequences for separate document types, with a prefix on each. EST for estimates, INV for invoices, CN for credit notes.
Two benefits. A glance at a reference tells you what kind of document it is, which matters on the phone when somebody says "I am looking at 0104". And your invoice sequence stays clean, because estimates that never turned into anything are not burning invoice numbers.
The prefix does not break the sequence rule. INV-0101, INV-0102, INV-0103 is an unbroken sequence with a prefix, and that is fine everywhere.
If you already have gaps
Most people reading this have some. A few deleted drafts, a numbering scheme that changed, a year where two systems were running.
You cannot retrospectively create the missing documents and you should not try. What you can do is write down what happened, once, while you still remember: a short note listing each gap and its reason. Numbers 0043 to 0045 were drafts abandoned when the system allocated on creation. Numbering changed format in March 2025 when moving software.
Keep that note with the year's records. It costs ten minutes and it turns each gap from an unexplained absence into a documented one, which is the entire difference an auditor is looking for. An explanation given at the time reads very differently from one constructed under questioning three years later.
Then fix the cause so the list stops growing, which usually means changing when numbers are allocated rather than being more careful.
Starting somewhere other than one
A lot of people start at 1001 rather than 1 so that the first customer cannot tell they are the first customer.
Harmless, and the sequence rule does not care where it starts, only that it does not skip. If you do it, pick the number and never change the format again. Changing from 1001 to 2026-001 in March creates a discontinuity that is not a gap but looks like one, and you will be explaining it for years.
If you are setting up a sequence for the first time, it is one of several decisions that come together when a trade goes properly invoiced, and it is worth making once rather than twice.