What is remittance advice?
By Tim White · Glossary · Last updated
Remittance advice is a note the payer sends a supplier listing which invoices a payment covers. When one bank transfer settles five invoices, the remittance lists those five, plus any credits taken, so the supplier can apply the money to the right bills.
A worked example
You send Brightline Paper one transfer of 9,150.00. It covers invoices for 4,000.00, 3,500.00 and 2,000.00, less a 350.00 credit memo for a short shipment. Without a note, Brightline sees 9,150.00 arrive and has to work backwards to find which bills it clears. With the remittance, their bookkeeper applies it in a minute.
What to include
Payment date, amount and method. Each invoice number and the amount paid against it. Any credit memo or deduction, with its reference. Your account number with the supplier, if they gave you one. Most accounting and banking software can send this automatically when you pay a batch of bills.
Why it's worth the effort
A payment the supplier can't place sits as unapplied cash on their side. Your invoices still show as open, and a reminder or late-fee notice follows. A short remittance prevents that.
Common questions
Is remittance advice required?
No. It's a courtesy, but a useful one, and some large suppliers ask for it.
What's the difference between remittance advice and a receipt?
The payer sends remittance advice to say what a payment covers. The supplier issues a receipt to confirm they got the money.
Sources
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