Remittance advice is communication between buyer and seller that notifies of the payment of an invoice. Think of it as a courtesy call you give a business you’re buying from to let them know payment is on the way.
Is remittance advice proof of payment?
Remittance advice is not a proof of payment or a cash receipt; it is a notification that you’ve paid a supplier’s invoice. Remittance advice documents are most likely sent via email as PDFs. They often help businesses reconcile payments by attaching the invoice number & payment method.
Some types of remittance advice formats include:
- Emailed remittance advice
- Electronic data interchange/electronic remittance advice (think eInvoicing confirmations)
- Paper remittance advice
Why send remittance advice?
If sending remittance advice is not compulsory, then why do businesses still do it? Businesses send out remittance advice for a number of benefits:
- Communication and trust are shared between the customer & supplier/B2B relationships
- Great record-keeping for internal accounting
- Cash flow management and forecasting
- Solid business procedure helps reduce billing errors and payment disputes
Remittance advice as a form of ongoing communication
Remittance advice notes and slips communicate that you are sending immediate payment to your supplier, client, or other business affiliate. It lets those who do business with you know that they will get their payment soon.
It keeps things above board with your suppliers. If something happens between receiving supplies and the payment being processed, you can cross-reference documents such asย invoices,ย purchase orders,ย and remittance advice slips to resolve issues.
For example, a cafe receives its coffee supplies from a single supplier on a 30-day payment term. They receive coffee deliveries every week. By sending remittance advice for multiple orders and invoices, the cafe keeps its supplier informed that it is being paid for recurring shipments.
Remittance advice and payment processing
Besides improving business communication, remittance advice also supports your internal bookkeeping and accounting systems. Your accounts receivable department or accounting team would use remittance advice as a financial document that signifies payments they should be looking for.
You will also be better prepared and more efficiently able to process your financial records when you anticipate incoming payments.
Cash flow management and forecasting
Having a record of where your money is going and how much is important for businesses. Remittance advice provides direction on the cash flow out of your business. If you are handling hundreds or thousands of business transactions, having an audit trail that helps you keep on top of where your money goes is important.
Remittance advice is good business procedure
Remittance advice is good practice because it reduces errors in your billing process โ identifying mismatched payments and avoiding double payments โ while also providing evidence for payment disputes.
Imagine the supplier from our example above accused the cafe of not paying them and sent an invoice requesting payment. With basic remittance advice, the cafe could provide the invoice number, the amount paid and the payment method.
Remittance advice slip example
When you send remittance advice, your note should contain:
- The buyer’s company name and address
- Your company name and address
- Payment date
- Invoice number
- GST (if applicable)
- payment amount
- The goods or services paid for
Any additional details can be added if required, but a remittance advice should be short and succinct. For example, here is a remittance advice template:
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Remittance advice template
Once you have a basic template to work with, you can email remittance advice to your suppliers.
Remittance advice and your business
Consider sending remittance advice as part of your business procedure. While it isn’t necessary, it is a standard courtesy that many companies adopt. Adding that extra step to your processes is one way to making your business seem more reliable and also have proper internal procedure.
