A complete guide to remittance and remittance advice

Here’s a simple guide, with answers to frequently asked questions.

What is a remittance?

Remittance refers to sending back or transferring an amount of money to another party such as a supplier, contractor, vendor or another business. Remittance is generally used for overseas payments, although payments from bills to invoices or personal money transfers to friends or family is considered a remittance.

What is remittance advice?

Remittance advice is a detailed document sent by the payer as a notification of payment – so may be sent from a customer to a supplier. The remittance advice is often sent along with the payment amount. It helps payees match invoices with payments.

Suppliers may include remittance advice as part of a physical invoice, to be detached, filled in and returned with payment. Otherwise, a confirmation email or snapshot of the remittance advice may be used for online payments.

Why use remittance advice?

The remittance advice increases transparency around invoices, validates the amount paid and received, and helps businesses manage cash flows and client account details.

How do businesses generate remittance advice?

Remittance advice can be paper-based, electronically automated or customised using different templates for each payment receipt. Businesses can use spreadsheets or other online template resources and tools to customise their remittance advice. Cloud accounting software can also generate advice and email it to the payment recipient.

What does business remittance advice include?

Incorporate all the components of remittance advice before sending it out to avoid any miscommunications.

Include:

• Your letterhead, business name and address
• Recipient’s name and address
• Method of payment
• Payment amount
• Invoice number
• Issued date of remittance
• Date when the recipient can expect the payment to be completed
• An email address if remittance advice is emailed
• Relevant tax details
• Contact details for any questions

What are the different kinds of remittance advice?

• Basic remittance advice: A simple letter that states the invoice number and the total payment amount.
• Removable invoice advice: Invoice comes with a removable remittance slip that recipients fill and submit back with the payment.
• Scannable remittance advice: Used for electronic record keeping.

Do I need to send remittance advice?

No, but it can simplify accounts payable and receivable, and is a courtesy.

How do I send remittance advice?

There are no legal guidelines, but several options:

• Remittance advice via email: Scan your remittances or send electronically generated remittance advice
• Remittance advice via snail mail: Send the remittance advice along with the payment amount.
• Other digital methods: Accounting software automatically updates and sends the remittance advice.

What are the benefits of electronic remittance advice?

Most businesses use electronic remittance advice (ERA) instead of paper remittances. Benefits may include:

• Straightforward and fast: Receive the receipt on the same day the claim is finalised.
• Streamlines the reconciliation system: Automation helps businesses reconcile and manage outstanding balances in a clear and organised way.
• Paperless
• Efficient: Saving on administrative costs and time, including in managing secondary claims

What does the term ‘payment remittance’ mean?

A payment remittance is simply another name for sending money for payment purposes.

For example, John runs a business in the UK and buys some products from China. John will then have to pay for the order by sending a payment remittance to the China supplier.

A payment remittance can be sent internationally or domestically by different means like a cheque by mail or peer-to-peer money by alternative transfer services.

Is remittance advice proof of payment?

No, it is a notification of the processed payment sent to the payee, so always confirm payments through existing cash receipts.

This article was first published in January 2022, contributed by Clear House Accountants. It was edited and updated in September 2023.