For both buyers and sellers of goods and services, understanding the invoicing process is beneficial. As a payer, sending a remittance advice to the payee helps them match the received payment with the invoice and services provided. As a payee, requesting a remittance advice from the payer helps streamline the accounts receivable process.
So, what is a remittance advice? This article provides a detailed guide.
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What is a Remittance?
A remittance is the transfer or sending of funds to another party. Paying overseas bills or invoices also falls under the category of remittance, but more often, it refers to overseas workers sending money back to their friends and family in their home country.
What is a Remittance Advice?
In short, a remittance advice is a payment confirmation document sent by a payer to a supplier. Typically, when a payer wants to inform a supplier that a payment has been made, the remittance advice serves as direct proof. In a way, a remittance advice can be considered similar to a receipt from a cash register. Its primary function is to match an invoice with a payment.
Although the need for remittance advice has diminished with the rise of online payments, sending an email about the payment status is still a professional courtesy that helps maintain good business relationships, even when paying suppliers through online channels.
What Should Be Included in a Remittance Advice?
The key information that should be included in a remittance advice is as follows:
- Name and address of the remitter
- Name and address of the payee
- Method of payment
- Amount of remittance
- Invoice number
It is best to include a company letterhead on the remittance advice, listing the company name and the contact information of the team members who handle remittance-related matters. This allows the supplier to contact the appropriate person if they have any questions about the payment.
Is it mandatory to send a remittance advice?
Remittance advice is not mandatory, but sending one is a business courtesy that helps maintain good supplier relationships. Suppliers appreciate receiving remittance advice because it serves as a business record and helps them reconcile payments with the invoices they have issued. For the payer, preparing a remittance advice doesn’t require extra effort, as many suppliers attach a remittance advice template with their invoices. This way, the payer doesn’t have to worry about creating one from scratch and can ensure the information is complete and correctly formatted.
What are the Types of Remittance Advice?
There are several different types of remittance advice:
- Basic Remittance Advice – A simple letter containing the invoice number and payment amount.
- Removable Remittance Advice – Often sent with the invoice to encourage the payer to fill it out and send it back.
- Scannable Remittance Advice – The payer can submit the remittance advice by scanning it.
What is the Best Way to Send a Remittance Advice?
The most common way to send a remittance advice to a supplier is via email. When sending a remittance advice email, it is crucial to ensure that the correct contact information for the payee is entered in the recipient field. If the email is inadvertently sent to the company’s general inbox, the remittance advice may be overlooked, defeating its purpose.
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