Remittance Advice Explained: Meaning, Examples, and Best Practices

Remittance advice is a document or electronic message that explains a payment made showing which invoices or bills the payment covers. It helps accounting teams match payments to invoices, resolve discrepancies, and maintain accurate financial records.

In this guide, we’ll explain what remittance advice means, how it works, the different types, and why it’s essential for efficient payment reconciliation.

What is remittance advice?

Remittance advice is a notification sent by a customer to a supplier or vendor detailing what a payment covers. Think of it as a payment slip that answers the question: “What is this money for?”

When a business receives a payment, they need to know which invoice it’s paying off. Without this information, matching payments to the right bills becomes guesswork. Remittance advice solves this problem by providing a clear breakdown of what each payment covers.

The remittance advice definition is simple: it’s a document that connects a payment to specific invoices, purchase orders, or bills. It can arrive as a paper letter with a check, an email attachment, or through electronic systems like EDI (Electronic Data Interchange) or EFT (Electronic Funds Transfer).

Banks like HSBC, Barclays, Deutsche Bank, and Commbank all support various remittance advice formats for business customers. So what’s remittance advice in practical terms? It’s your payment receipt that tells the full story.

Note: In accounting, “remittance advice” is typically treated as uncountable (like “information”), though “remittance advices” appears in some contexts when referring to multiple individual documents.

Remittance advice example

Let’s say you run a small plumbing supply business. A construction customer orders materials totaling $3,500, split across three separate invoices. When they send payment, they include a remittance advice that shows:

• Customer name and account number
• Payment date and total amount: $3,500
• Payment method: ACH transfer
• Invoice #1043: $1,200
• Invoice #1087: $1,500
• Invoice #1092: $800

This remittance advice example shows you exactly which invoices are paid. You can quickly update your ledger and close out those accounts without confusion.

Are businesses required to send remittance advice?

No, sending remittance advice isn’t legally required in most cases. However, it’s considered a best practice in professional business transactions.

While there’s no law mandating remittance advices, many industries expect them as standard procedure. Large suppliers often require remittance advice to process payments efficiently. Government agencies may request specific remittance formats for contract payments.

Healthcare is one area where provider remittance advice follows strict standards. Insurance companies send Electronic Remittance Advice (ERA) to medical providers explaining what they’re paying for each claim.

Even though it’s not mandatory, sending payment remittance advice prevents payment disputes, speeds up bank reconciliation, and maintains good supplier relationships. It’s a key component of getting paid faster and maintaining healthy cash flow.

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What information does a remittance advice document include?

A complete remittance advice includes several key pieces of information to help the recipient process the payment correctly.

Payer information:

• Company name
• Account number
• Contact details

Payment details:

• Payment date
• Total amount paid
• Payment method (check, ACH, wire transfer, credit card)
• Transaction or reference number

Invoice details:

• Invoice numbers being paid
• Original invoice amounts
• Amount applied to each invoice
• Any adjustments, discounts, or deductions

Additional information:

• Reason codes for any adjustments
• Outstanding balance (if partial payment)
• Notes or special instructions

The layout and format vary depending on whether it’s a paper document, Excel template, Word document, or electronic system. A remittance advice template in Word might be simple and straightforward, while EDI remittance advice follows standardized electronic formats.

According to the IRS, businesses should maintain comprehensive records of all transactions. The IRS recommends keeping remittance documentation alongside your invoices and bank statements to support accurate record-keeping during tax preparation or audits.

Is remittance advice a proof of payment?

Remittance advice is not technically proof of payment—it’s proof of intent to pay or notification that payment has been sent.

The actual proof of payment comes from bank statements, cleared checks, or payment confirmation receipts. A remittance advice tells you a payment is coming and what it covers, but it doesn’t guarantee the money has actually been transferred.

The difference between a receipt and remittance advice is important. A receipt confirms money was received. Remittance advice explains what a payment covers. You need both for complete financial records.

Many businesses download a remittance advice sample to create their own templates, ensuring consistency across all payment notifications they send to vendors.

Types of remittance advice

Different payment methods and business needs have led to several types of remittance advice. Understanding each type helps you choose the right remittance advice format for your business.

Basic remittance advice

Basic remittance advice is the simplest form—a straightforward document or email listing what a payment covers. It might be a letter, a slip, or a simple spreadsheet showing invoice numbers and amounts.

Many small businesses use basic remittance advice because it’s easy to create and understand. You can make a remittance advice sample in Word or Excel in minutes. However, it requires manual processing on both ends, which can be time-consuming for companies handling hundreds of payments.

Removable invoice advice

Removable invoice advice is a remittance advice check stub—a perforated section attached to a physical check that you can tear off and keep for your records.

When you receive a check with this type of remittance, the top or bottom portion contains payment details. You deposit the check and keep the removable section for your accounting records. While checks are becoming less common in business transactions, they remain particularly common in payroll processing, where employees receive a payslip showing detailed deductions, hours worked, and net pay alongside their check.

Scannable remittance advice

Scannable remittance advice uses barcodes or QR codes that accounting software can read automatically. When you scan the document, it imports payment information directly into your system.

This significantly reduces data entry errors and speeds up payment reconciliation. Banks and large suppliers often use scannable remittance advice to process high volumes of payments efficiently. Some accounts payable automation software can read these codes and automatically match payments to invoices.

Benefits of digital remittance advice

Electronic remittance advice has transformed how businesses handle payment notifications. Moving from paper to digital formats offers several advantages.

Improve speed and accuracy

Digital remittance arrives instantly via email or through integrated systems. There’s no waiting for mail delivery or manually entering data from paper documents.

Electronic systems reduce human error. When payment information flows directly from one system to another, there’s less chance of typos or lost documents. Accounts receivable software can automatically match incoming electronic remittance advice to open invoices, streamlining your entire payment workflow.

Standardize formats for global transactions

Electronic remittance advice follows industry standards like EDI, making international business smoother. Whether you’re receiving payment from a vendor in the US or a supplier in Europe, standardized formats ensure everyone understands the information the same way.

Better visibility on cash flow

Digital remittance gives you real-time updates on incoming payments. Instead of waiting to reconcile your bank statement, you know immediately which invoices are getting paid.

This visibility helps with cash flow projection and financial planning. When you can see payment patterns clearly, you make better decisions about when to pay your own bills and manage your net cash flow.

Create transparency

Electronic remittance advice creates a clear audit trail. Every payment notification is timestamped and stored digitally, making it easy to track payment history and resolve disputes during an audit.

Both parties can access the same information simultaneously, preventing the “we sent payment weeks ago” arguments that plague paper-based systems.

Reduce the risk of fraud

Digital remittance advice is harder to forge than paper documents. Electronic systems use encryption, authentication, and secure transmission protocols to protect payment information.

What’s the best way to send remittance advice?

The best method depends on your payment volume, your supplier’s capabilities, and your existing systems.

• For occasional payments: Email works perfectly. Create a simple remittance advice template and attach it when you send payment.
• For regular B2B transactions: Consider EDI or integrated systems. If you send multiple payments monthly to the same suppliers, electronic remittance advice through your accounting software saves time. Payment processing agencies can also help standardize your remittance workflow.
• For check payments: Use removable remittance advice. The perforated stub provides immediate documentation when your supplier deposits the check.
• For ACH or wire transfers: Most banks offer electronic remittance advice options through their business portal, ensuring the information arrives with the money.

Whatever method you choose, consistency matters. Use the same format every time. This predictability helps your suppliers process payments faster and keeps your business relationships smooth.

Conclusion

Remittance advice is a simple yet powerful tool for managing business payments. Clear documentation about what each payment covers prevents confusion, speeds up reconciliation, and maintains professional relationships.

Moving to electronic remittance advice offers even more benefits—faster processing, fewer errors, better cash flow visibility, and stronger fraud protection. As business becomes increasingly digital, electronic formats are becoming the standard.

Start by choosing the remittance method that fits your current volume and systems. Even a basic email with payment details is better than sending money without explanation. As your business grows, you can upgrade to more sophisticated electronic systems that integrate with your accounting software.

Get Started with Invoice Fly’s Software

Invoice Fly is a smart, fast, and easy-to-use invoicing software designed for freelancers, contractors, and small business owners. Create and send invoices, track payments, and manage your business — all in one place.

Get Started Now