What is Remittance Advice?

Remittance advice is a document sent by a payer to a vendor explaining how a payment should be applied. It tells the vendor: “We sent you money, and here’s what it’s for.”

Think of it as a receipt in reverse. Instead of the vendor telling you what you owe, you’re telling the vendor what you paid and which invoices the payment covers.

Why Remittance Advice Matters

For You (the Payer)

Creates a paper trail: Documents what you paid and why
Reduces vendor inquiries: Vendors know which invoices are paid
Speeds up reconciliation: Clear records for your bank reconciliation
Supports dispute resolution: Evidence of payment application

For the Vendor

Enables accurate cash application: Knows exactly which invoices to close
Reduces guesswork: No hunting for what a payment covers
Speeds up AR reconciliation: Clear information for their records
Improves customer relationships: Fewer back-and-forth inquiries

What’s Included in Remittance Advice

A complete remittance advice includes:

Essential Information

Field	Description
Your company name	Who is sending the payment
Payment date	When payment was sent
Payment amount	Total payment amount
Payment method	Check #, ACH, wire reference
Invoice number(s)	Which invoices are being paid
Invoice amounts	Amount applied to each invoice

Additional Details

Invoice dates
PO numbers
Any deductions (discounts taken, credits applied, disputed amounts)
Remaining balance (if partial payment)
Contact information for questions

Example Remittance Advice

REMITTANCE ADVICE

From: ABC Company
To: XYZ Supplies Inc.
Payment Date: January 15, 2025
Payment Amount: $4,850.00
Payment Method: ACH - Ref #789456123

Invoices Paid:
Invoice #    Invoice Date    Amount      Discount    Net Paid
INV-1001     12/15/2024     $2,000.00   $40.00      $1,960.00
INV-1002     12/22/2024     $1,500.00   $0.00       $1,500.00
INV-1003     01/02/2025     $1,400.00   $0.00       $1,400.00

Credit Applied:
CM-0045      ($10.00)

Total Payment: $4,850.00

Questions? Contact ap@abccompany.com

Types of Remittance Advice

Basic Remittance

Simple notification with payment amount and invoice references. Minimal detail, often just a list.

Detailed Remittance

Includes full invoice details, discounts, credits, and deductions. Best for complex payments covering multiple invoices.

Scannable Remittance

Includes barcodes or QR codes for automated processing. Common with high-volume billers like utilities.

By Delivery Method

Attached to check: Physical remittance slip included with check payment (often as a tear-off stub)

Email: PDF or text in email body, sent separately or with payment notification

EDI (Electronic Data Interchange): Automated transmission between business systems (820 transaction set)

Portal: Accessed through a vendor or banking portal

ACH addenda: Payment details included in the ACH transaction record (limited to 80 characters)

When to Send Remittance Advice

Always Send When

Paying multiple invoices with one payment
Taking early payment discounts
Deducting credits or disputed amounts
Making partial payments
Payment amount differs from invoice amount for any reason

May Skip When

Single invoice, full payment, no adjustments
Recurring identical payments (subscriptions)
Vendor has real-time visibility (integrated systems)

Timing

Send remittance advice when payment is sent, not before or after:

With check: Include physical remittance slip
With ACH/Wire: Email remittance same day
With card: Email or portal notification

Best Practices for Sending Remittance

Be Specific

Include invoice numbers exactly as they appear on the vendor’s invoice. “December invoice” isn’t helpful; “INV-2024-1234” is.

Explain Deductions

If you’re taking a discount or withholding disputed amounts, say so explicitly:

“Invoice #1234: $1,000.00 less 2% early payment discount = $980.00”

Send Promptly

Send remittance with or immediately after payment. Don’t wait until the vendor calls asking about an unapplied payment.

Use Consistent Format

Standardize your remittance format so vendors know what to expect and can process efficiently.

Provide Contact Info

Include a contact for questions. This prevents general inquiries from clogging your main AP inbox.

Processing Remittance Advice (AR Perspective)

If you receive remittance advice from your customers:

Match to Open Invoices

Verify the invoices listed exist and amounts match your records.

Apply Payment

Post the payment against the correct invoices in your AR system.

Investigate Discrepancies

If customer took an unearned discount or shorted payment: - Contact customer for explanation - Document the discrepancy - Decide whether to pursue or write off

Acknowledge Receipt

For important customers or large payments, confirm you received and applied the payment correctly.

Common Remittance Challenges

Missing Invoice Numbers

Payment arrives without clear invoice references.

Solutions: - Contact payer for clarification - Match by amount and date - Improve your invoice design (prominent invoice numbers)

Incorrect Invoice Numbers

Customer references invoices that don’t exist or are already paid.

Solutions: - Check for typos (INV-1234 vs INV-1324) - Check for duplicate payments - Contact customer with your open invoice list

Partial Payments Without Explanation

Customer pays less than invoiced without explanation.

Solutions: - Contact for explanation before applying - Review for possible disputes - Check for credits they may be referencing

Unearned Discounts

Customer takes early payment discount but pays late.

Solutions: - Invoice for the difference - Contact customer about payment terms - Consider relationship value before enforcing

Automating Remittance

For Sending

Modern AP systems generate remittance automatically: - Attached to payment files - Emailed to vendors - Available in vendor portals

For Receiving

AR systems can process electronic remittance: - EDI 820 imports - Email parsing - Portal integrations - Bank lockbox services

Automation reduces manual matching and speeds cash application.

Key Takeaways

Remittance advice tells vendors how to apply your payment
Include invoice numbers, amounts, and any adjustments
Send remittance when payment is sent, not before or after
Detailed remittance reduces vendor inquiries and speeds reconciliation
Electronic formats enable automation on both sides

Want vendors to include invoice details with their submissions? See how BillerPlus structures invoice intake →