Remittance advice explained: Purpose, tips & delivery

When running a business, keeping track of incoming payments is crucial.

But it's equally important to let your customers know when you've made a payment, especially if it's a large or urgent one. That’s where remittance advice comes in handy.

For both suppliers and customers, a bit of extra clarity in the invoicing process can make all the difference.

As a customer, sending a remittance advice slip ensures your payment is correctly matched to the right invoice, avoiding any confusion. 

On the flip side, as a supplier, asking for one can streamline your accounts receivable, making your financial operations smoother.

But what exactly is remittance advice, and why is it so valuable? Let's start with the basics.

What is remittance?

The term "remittance" comes from the word ‘remit,’ which means “to send back.”

Essentially, remittance refers to money that is sent from one person or entity to another.

This can apply to various types of payments, such as paying bills or settling invoices. 

The term is often used in the context of international payments, especially when the sender and recipient are in different countries.

Additionally, remittance can also refer to personal money transfers, such as sending funds to friends or family members.

What is remittance advice?

Remittance advice, commonly known as "RA," is a document that a customer sends to a supplier to confirm that a payment has been made.

It’s like a notification that comes along with your payment, outlining the details such as the purpose, amount, and date.

Think of it as a detailed receipt that provides clarity on a transaction, ensuring that everything is transparent and that financial dealings between parties go smoothly.

In practice, remittance advice usually includes essential information like the invoice number, the amount paid, the payment date, and any relevant reference numbers or codes.

While the format might vary slightly from one organization to another, the core elements typically remain consistent.

This document is crucial for both the sender and the recipient as it serves as proof of the transaction and helps keep the accounts in order.

Different types of remittance advice 

Not all remittance advice is created equal, and the way it’s delivered can vary too.

Some might come in the mail as a physical document, while others are digital and sent electronically.

Here’s a look at the different types of remittance advice you might encounter:

1. Basic remittance advice

This is the simplest form of remittance advice. It usually includes just the essential information—like the invoice number related to the payment and the total amount paid.

It’s straightforward and to the point, making it easy for both parties to understand which payment corresponds to which invoice.

2. Removable invoice advice

This type is often sent alongside an invoice. It includes a detachable slip that the customer fills out and returns with their payment.

This method not only helps ensure that payments are accurately matched with their corresponding invoices; it also makes it easier for the seller to track and process payments.

It’s a bit old-school but still effective for those who prefer a physical paper trail.

3. Scannable remittance advice

Designed for businesses that want to keep things digital, scannable remittance advice is formatted in a way that makes it easy to scan by OCR and enter into electronic systems.

This type streamlines record-keeping and helps automate the accounts receivable process, reducing manual data entry and the potential for errors.

Types of remittance advice based on delivery method 

Remittance advice can also be categorized based on how it’s sent:

Email remittance advice: Delivered via email, this type can either be included in the email’s body or as an attachment. It’s becoming more popular as businesses move away from paper-based methods.

Paper-based remittance advice: This traditional form is usually handwritten or printed and sent through the mail. It includes all the necessary payment details.

EDI-based remittance advice: This type is transmitted through EDI (Electronic Data Interchange) systems. It consists of alphanumeric characters and is perfect for businesses handling large payment volumes with automated accounts receivable processes.

Web-based remittance advice: This digital version is sent through web or cloud-based accounts receivable portals, making it easy to manage payments online.

What details should be included in remittance advice?

When it comes to remittance advice, the details you receive can vary depending on the payment method.

For a check, you'll usually get a detailed paper remittance, while an ACH payment might include little to no information.

If sent via email, your accounts team can track payments and resolve discrepancies with the point of contact.

To avoid confusion, it’s essential that it includes key details such as:

• Customer’s name & address
• Supplier’s name & address
• Payment date & method
• Invoice/account number
• Payment reference number
• Amount paid & applied
• Outstanding balance

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Why is remittance advice so important?

As accounting and payment methods evolve, more small and medium-sized businesses are transitioning from traditional checks to digital solutions like ACH, wire transfers, and online wallets. 

Even though we're moving away from checks, remittance advice remains essential in financial transactions.

But why is it still so crucial? Let’s break it down:

1. A courtesy gesture

Including remittance advice with your payment shows suppliers that you’re committed to transparency and clear communication. It’s like saying, “Here’s your payment and all the details you need.”

This simple gesture helps build trust and strengthens business relationships.

2. Better vendor relationships

Trust is everything in business. Sending accurate and timely remittance advice shows your suppliers that you’re reliable.

This not only helps smooth out transactions for better working capital but can also lead to more favorable terms and stronger support from your vendors.

3. Simplifies invoice matching

Remittance advice is incredibly useful for matching payments with invoices.

Providing key details like invoice numbers and payment amounts, makes it much easier for finance teams on both sides to reconcile payments, reducing the chance of disputes or discrepancies.

4. Streamlines record-keeping

Keeping accurate records is crucial for any business.

Remittance advice helps by organizing payment details in a clear, structured way, which is invaluable for everything from audits to analyzing financial metrics and KPIs.

5. Reduces errors

Payment errors can be costly, but detailed remittance advice helps prevent them.

By clearly outlining the payment details, it minimizes misunderstandings or misallocations, saving time and preserving the accuracy of your financial data.

6. Boosts accounting efficiency

Remittance advice speeds up the reconciliation process, making it easier for accountants to match payments with invoices and keep records up to date.

This efficiency allows accounting teams to focus on more strategic tasks, ultimately improving financial management.

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To learn more about optimizing your financial management, dive into our guide on Profit and loss account: Your business's financial report card.

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How to create and send a remittance advice document?

Sending your remittance advice as soon as you’ve made a payment is crucial.

This timely communication helps the recipient promptly acknowledge your payment, reducing the risk of deferred payments or late fees.

Here are some tips to ensure it reaches its destination efficiently and securely.

1. Methods for delivering remittance advice

Physical mail 

Before the shift to digital payments, remittance advice documents were often sent by mail.

These were typically sent to the company’s or contact's address and sometimes even accompanied by physical checks. 

While mailing remittance advice is less common today, it’s still an option, especially for those who prefer traditional methods.

Email

Email is usually the quickest and most convenient way to send remittance advice documents.

To do this effectively, ask for the correct email address upfront, preferably for the accounting department or the specific contact, instead of relying on a general company email.

Other digital methods

Many modern accounting platforms simplify the process of sending and receiving remittance advice notices digitally.

Some software even allows you to set up automatic notifications, which get sent directly to the recipient whenever an invoice is paid or scheduled for payment.

2. Choosing the right delivery method

When deciding how to send remittance advice, consider factors like your company size, the number of vendors you deal with, and your overall profitability.

For instance, smaller companies might prefer to send remittance advice with their payments, while larger businesses often provide suppliers with access to their invoice software or accounts payable systems to send notices directly through the platform.

3. Ensuring secure delivery

With the growing ease and efficiency of automation, many companies now automate their remittance advice process.

This not only speeds up the reconciliation of invoices and payments but also helps keeping financial records accurate and up to date.

Automation minimizes human error, ensuring your business’s financial figures reflect the most current and accurate information possible.

Tips to request and send remittance advice 

To make the most of your remittance emails, follow these best practices:

1. Craft a clear subject line: Use a straightforward subject line like “Payment Remittance for Invoice #123456” to help recipients easily recognize and prioritize the email.

2. Include key details: Ensure the email body contains all necessary information, such as invoice number, payment amount, and payment method, so the payment can be processed smoothly.

3. Attach relevant documents: If needed, attach any supporting documents, like the invoice or payment receipt, to provide a complete record of the transaction.

4. Use templates: Create standardized email templates for consistency and efficiency. These can include dynamic fields to automatically fill in relevant details.

‍Avoiding data risks: Protect your remittance emails by using secure transmission protocols, encrypting sensitive information, and ensuring proper authentication to prevent unauthorized access.

What is the difference between remittance advice and remittance notice?

The difference between remittance advice and remittance notice lies in their timing and purpose within the payment process.

Even after sending a remittance notice, some customers may delay their payments. But don't worry! You can always count on cashflow solutions to accelerate payment on invoices.

Boost your growth through invoice financing

Remittance advice is more than just a courtesy—it's a crucial tool for ensuring accurate and transparent financial transactions.

By sending it promptly, you help maintain strong relationships with your suppliers, streamline your accounts, and reduce the risk of errors. 

Whether you're using email, physical mail, or automated digital methods, choosing the right delivery approach can make all the difference.

But why stop at remittance advice?

If you're looking to further optimize your cash flow and simplify your financial processes, consider exploring alternative financing solutions.

With Stenn's invoice financing, you can unlock the capital tied up in your invoices, providing your business with the flexibility it needs to grow without the hassle. 

Ready to take the next step? Discover how Stenn can help you find the right financial solution today.