Remittance Advice
Remittance advice is a document sent by a payer (buyer) to a payee (vendor) explaining how a payment should be applied. It lists which invoices are being paid, any adjustments or discounts taken, and the total payment amount.
Purpose
Remittance advice helps vendors: - Apply payments correctly to the right invoices - Reconcile accounts receivable efficiently - Identify discrepancies early - Reduce payment inquiries to the buyer
What’s Included
| Field | Description | Example |
|---|---|---|
| Payer name | Company making payment | ABC Company |
| Payment date | When payment was sent | 01/15/2025 |
| Payment method | How funds were sent | ACH, Check #12345 |
| Payment amount | Total amount paid | $5,250.00 |
| Invoice details | List of invoices paid | See breakdown |
Invoice Breakdown Example
| Invoice # | Invoice Date | Invoice Amount | Discount | Amount Paid |
|---|---|---|---|---|
| INV-1001 | 12/15/2024 | $2,000.00 | $40.00 | $1,960.00 |
| INV-1002 | 12/20/2024 | $1,500.00 | $0.00 | $1,500.00 |
| INV-1003 | 12/28/2024 | $1,790.00 | $0.00 | $1,790.00 |
| Total | $5,290.00 | $40.00 | $5,250.00 |
Types of Remittance Advice
Basic Remittance
Simple list of invoices paid. Suitable for straightforward payments.
Scannable Remittance
Includes barcode or reference number for automated processing.
Electronic Remittance (ERA/EDI)
Machine-readable format (EDI 820 or similar) for automated cash application.
Detachable Stub
Tear-off portion of a check that lists payment details.
Delivery Methods
| Method | Pros | Cons |
|---|---|---|
| Attached to check | Traditional, familiar | Manual, delayed |
| Fast, easy to send | May be overlooked | |
| Vendor portal | Self-service access | Requires login |
| EDI/Electronic | Automated processing | Setup required |
| ACH addenda | Travels with payment | Character limits |
Remittance Advice vs Related Documents
| Document | Purpose | Sent By |
|---|---|---|
| Remittance advice | Explains payment application | Buyer |
| Invoice | Requests payment | Vendor |
| Payment confirmation | Confirms payment sent | Bank/Buyer |
| Receipt | Confirms payment received | Vendor |
Best Practices for Sending
Include: - Clear payer identification - Payment date and method - All invoice numbers being paid - Any discounts or adjustments - Contact for questions
Timing: - Send same day as payment - Before payment if possible (for large payments) - Immediately for wire transfers
Best Practices for Receiving
As a vendor receiving remittance: - Match to open invoices immediately - Investigate discrepancies promptly - Update AR system with details - Follow up on partial payments - Archive for audit trail
Common Issues
| Issue | Cause | Resolution |
|---|---|---|
| Missing remittance | Payer didn’t send | Contact AP department |
| Can’t identify payment | Vague description | Request detailed remittance |
| Amount doesn’t match | Discount or adjustment | Review remittance details |
| Invoice not found | Wrong invoice number | Cross-reference by amount/date |
Automation
Modern systems handle remittance automatically: - AP systems generate remittance with each payment run - Banks transmit electronic remittance with ACH - Vendor portals provide self-service access - AI cash application matches payments without manual remittance
Related Terms
- ACH - Electronic payment method
- Payment Terms - When payment is due
- Net 30 - Common payment terms
Want vendors to submit invoices to one place with all the information you need? See how BillerPlus standardizes invoice intake →