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What is Remittance Advice & How Do Businesses Use Them?

two statrys mascot on a call discussing about remittance advice

Remittance advice is a document sent by payers to inform payees that they have paid certain invoices.

Remittance advice provides good communication for both parties involved in a transaction. It enables the payee to reconcile their accounts by matching payments with invoices, and it helps the payer keep track of their payment history.

Managing invoices is rarely the favourite part of anyone's job, especially for an employee. The reason why is that they are a headache to deal with, especially in large quantities. There are a lot of processes involved in an invoice, such as preparing them, sending them, chasing them and verifying them.

For customers and businesses alike, having comprehensive and transparent accounting processes will save both time and money which is why In this article, we will explain everything you need to know about remittance advice so you can stay on top of managing your invoices.

What Is Remittance Advice

Remittance advice is a document, a note, or a letter that a payer sends to a payee to notify which invoice has been paid. 

It is often used with international payments and when payment is made through wire transfer, cheques, or credit. 

Though it is not obligatory, it benefits both parties in the transaction.

For the payer, it helps to keep track of and avoid duplicate payments.

For the payee, remittance advice helps match receivables with invoices and accounts, which is particularly helpful when dealing with a single payment made to cover multiple bills with discounts applied or when dealing with a large number of invoices simultaneously.

💭 Tip: It is common practice to attach remittance advice to cheques. Since the payment recipient needs to cash the cheques, remittance advice serves as a record instead.

a screenshot of Statrys invoicing software

Information Included in Remittance Advice

Standard information in remittance advice includes

  • Payer or client's information: name, address, and contact details
  • Payee or supplier's information: name, address, and contact details
  • Remittance advice date: the date the remittance advice is issued
  • Payment date: the date the payment is made. This is not necessarily the same as the remittance advice date.
  • Payment amount: this should match the invoice or total amount owed. 
  • Payment method: by cheque, credit card, electronic transfer, or other methods.
  • Payment reference: any reference that helps connect the remittance advice with the actual numbers deposited into the account.
  • Any applicable discounts or taxes
  • Matching invoice: the invoice numbers and the invoice date that matches the payment. If the payment is for multiple invoices, provide a list.
  • Note: any useful additional information, for example, the payment’s expected arrival time.

Remittance Advice Example

Remittance advice comes in different formats. It can be a templated document, a basic note, or a letter sent through snail mail, fax, email, web portal, or software.

Below shows what a simple remittance advice note might look like:

An example of a remittance advice

In case there is a list of invoices paid, it may come in a table form.

An example of a remittance advice in table form.

💡 Tip: There is no legal guideline for remittance advice, but consider using company-headed paper for branding and credibility purposes.

What Is EFT Remittance Advice?

EFT remittance advice is a document sent by a customer to notify suppliers of a payment processed through Electronic Funds Transfer (EFT), such as ACH, electronic cheque, wire transfer, etc. 

💭 Tip: If you’re paying electronically and internationally through the SWIFT network, you need to send MT103 as a standard proof of payment. 

Types of Remittance Advice

There are three major types of remittance advice: 

Basic Remittance Advice

Basic remittance advice is a simple document that indicates fundamental information, like invoice numbers and payment descriptions. This can be in any form, a piece of paper or an electronic file.

Removable Invoice Advice

Removable invoice advice is detachable remittance advice attached as a section in an invoice. Think of a tearable part in a physical invoice. 

Customers may tear it, use it to fill out the information and notify the payee after processing a payment. 

Scannable Remittance Advice

Scannable remittance advice is remittance advice that can be scanned and recorded electronically. 

When Do Businesses Use Remittance Advice? 

Businesses can be both senders and receivers of remittance advice. Let's look at some common scenarios and how businesses use them to manage payments efficiently.

Sending Remittance Advice

When paying suppliers. A business that pays other businesses for goods or services, especially through cheques, EFT, or credit cards, may send remittance advice to its suppliers to maintain good relationships and ensure the timely delivery of orders.

When paying employees' salaries. Companies that pay employees via direct deposit or EFT may send them remittance advice that shows their net pay, deductions, and other details.

Receiving Remittance Advice

When preparing payment reconciliation and updating accounting records. This reconciliation or verification process involves the accounts receivable team comparing the transactions in the account with bank statements and confirming that the two are balanced at the end of the accounting period.

After reconciling, the business will update its accounting records. This helps keep track of cash flow, revenue, expenses, and taxes and helps prepare for audits or reports.

Things to Consider with Remittance Advice

Mismanagement of remittance advice may lengthen or complicate the payment process. Whether you're sending or receiving it, there are some considerations to keep in mind to ensure proper handling, such as:

1. Keeping a copy of all remittance advice documents for future reference

Remittance advice can be used to verify transactions, resolve disputes, or support claims. You can store them electronically or physically, depending on your security measures.

2. Using automation to streamline the process

While having remittance advice can be more time-efficient than not having one, manually managing multiple formats and a large quantity of it can still be daunting, time-consuming, and error-prone. 

That's where software can help. You can use tools that generate, send, receive, store, and automate remittance advice in a standardized and secure way.

In addition, you and your suppliers can use invoicing tools to send and keep track of invoice statuses.

Things to Consider When Sending

1. Send remittance advice promptly

Send remittance advice as soon as possible after making the payment. This helps the payee acknowledge your payment promptly, reducing the chances of late fees or interest charges.

2. Make sure they are accurate and legible

The chance of an incorrect or blurry remittance advice slip is never zero, so it's best to double-check for errors before sending remittance advice.

3. Confirm receipt of remittance advice with the other party

Confirm that the remittance advice note has reached its destination via a quick phone or email. This step can help to address potential issues on time.

Things to Consider When Receiving

1. Remittance advice does not confirm that the payment is deposited in your bank account

Some payment methods, such as international wire transfers, may take some time to clear or may be subject to fees or delays. 

There are possibilities of errors like incorrect information or insufficient funds that also cause a transfer to fail.

🔎 Tip: Learn about how long wire transfers can take to arrive and the common causes of their delay. 

2. Compare remittance advice with records

Ensure that discounts are agreed upon and that all the number in the remittance advice matches the invoices and records. Contact the sender as soon as possible if you find any discrepancies. This can reduce future hassle.

a screenshot of Statrys' invoicing software


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