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Remittance Advice

A remittance advice is a document sent by a customer to a vendor, notifying them that a payment was processed. It is not proof of payment. 

What is a Remittance Advice?

A Remittance Advice is often a simple letter structured in a specific format, informing the vendor that their invoice was cleared by the customer. The remittance advice might be in the form of an actual letter which includes a voucher confirming payment.

In most cases, sending a remittance advice isn’t necessary, but many vendors often prefer them since it allows them to easily match invoices with payments. It’s mostly considered a courtesy, especially in countries where payments are made via wire transfer. 

In general, a remittance advice can be considered equivalent to a cash register receipt, since they can be used to match invoices with payments. However, with the rise in online payments, sending a remittance advice isn’t always necessary.

Key Elements to Include on a Remittance Advice

A remittance advice generally contains certain common elements, including:

In most cases, the remittance advice is issued on the company’s letterhead and contains details of a point of contact that the recipient can contact in case they have a query. 

How do Businesses Use a Remittance Advice?

A remittance advice from a business notifies vendors that their invoice has been paid, allowing them to make any adjustments to their accounts receivables. 

Businesses also find it easier to manage records this way, since it allows them to match payments to invoices more effectively. It serves as evidence that the payment was transferred. 

Companies often use various payment methods, including: 

The remittance advice makes it easy for companies to know exactly when the buyer cleared the invoice, the mode of payment they used, the funds they expect to receive, and the reference number that they can use to match the transactions. 

In case the payment doesn’t arrive on time after the remittance advice, the company can simply reach out to the financial institution and determine the status. A remittance advice also helps companies streamline their cash flows, allowing them to know exactly when they’ll receive money.

When the company receives the remittance advice, they either increase their account or credit the accounts receivable for the specific customer. In case of a discrepancy, they can follow up with the customer. 

How Do Companies Generate a Remittance Advice?

Most businesses generally use software to generate a remittance advice, which are then sent to clients using either email or a secure document transfer service. 

Most companies have invoicing systems and ERPs that can generate a remittance advice automatically when a payment is made. Some P2P systems also have an add-on that allows companies to generate a remittance advice.

Many companies use EDI to directly communicate with their business partners and share a remittance advice, though cloud-based software solutions are becoming increasingly popular. 

Is a Remittance Advice Considered Proof of Payment? 

A remittance advice cannot be considered proof of payment — they simply indicate that the payment was processed. There is always the risk that the payment might not reach the recipient.

Why Do Businesses Prefer Sending a Remittance Advice?

There are several reasons why businesses prefer sending a remittance advice:

It’s an Act of Courtesy

The biggest reason why businesses (especially small to medium concerns) use a remittance advice is because they’re considered courteous. Vendors may worry when the payment doesn’t reflect in their bank account immediately, and this serves to relieve some of their worries. 

Improved Relationships with Vendors

When you send them a remittance advice, it shows that you’ve made the payment and sent them a notification, which is obviously received in a positive manner.

Helps with Invoice Matching

As mentioned above, a remittance advice make it easy for vendors to match invoices and streamline money matters. For smaller businesses, it also becomes easier to audit their accounts and maintain checks. 

Transform Your Payments Process with SoftCoPay

SoftCoPay provides a centralized, secure channel for all vendor payments through one single payment file. The seamless process, from receipt of invoice to vendor payment, delivers control and transparency with straightforward reconciliation through the ERP and a fully auditable payment process. SoftCoPay is part of the SoftCo ecosystem and includes dashboards that provide comprehensive reporting to simplify administration for both vendors and the AP team. SoftCoPay integrates seamlessly with the ERP and is bank agnostic.