A document number has one job: to identify one document, unambiguously, for as long as anyone might ask about it. Everything else is preference.
What a good scheme looks like
A short prefix and a number that only goes up.
INV-0001, INV-0002, INV-0003
QTE-0001, QTE-0002
CN-0001The prefix tells you what kind of document it is at a glance, which matters when a customer emails asking about “0042”. Padding the number to four digits keeps everything sorting correctly in a folder listing.
That is the whole recommendation. The rest of this page is about the ways people complicate it.
Two mistakes that cause real trouble
Reusing a number. If two invoices share a number, reconciliation breaks for both you and your customer, and in most jurisdictions it is also a problem with your tax records. Never reuse, even for a document you cancelled.
Leaving gaps you cannot explain. Auditors read a gap in a sequence as a missing invoice. If you void one, keep the number and mark the document as cancelled rather than deleting it and moving on.
Optional additions, and what they cost
By year: INV-2026-0001. Useful if you want a clean count per year. The cost is that you must remember to reset in January, and a mid year search now needs the year.
By customer: INV-ACME-0007. Reads nicely, but you now maintain a sequence per customer, and customer codes change when a company is renamed or acquired.
By month: rarely worth it. It gives you a longer number and no information the date field does not already carry.
If you are unsure, use the plain scheme. You can always add structure later; you cannot easily remove it from documents already issued.
Quotes that become invoices
Keep the sequences separate, and reference across. Put the quote number in the Details box of the invoice. Both sides can then match the two without either of you keeping a mapping.
Credit notes
Give them their own sequence, and always reference the original invoice number on the credit note. A credit note that does not say what it is correcting is nearly useless to whoever has to reconcile the account. There is more in fixing an invoice you already sent.
Where to keep the count
Whatever you will actually maintain. A note on your phone is fine for a handful a month. What matters is that you check the last number before issuing the next one, since nothing here counts for you.