What is remittance advice?

What remittance advice means

When a business pays a supplier by bank transfer, the bank statement usually shows only an amount and a short reference. A remittance advice fills in the detail. It tells the supplier the date of payment, the total paid and exactly which invoices and credit notes the payment covers.

It is usually emailed as a PDF or generated automatically by accounting or banking software at the moment the payment run is made. It is not a legal requirement in the UK, but larger customers send them as standard.

What it should include

• Payer's name and the supplier's name
• Date and method of payment
• Total amount paid
• Each invoice number and amount being settled
• Any credit notes or deductions taken off, with a reason
• The payment reference that will appear on the bank statement

Example

A design studio invoices a retail client three times: £1,200, £2,400 and £600. The client also has a £300 credit note for a cancelled job. It sends a single bank transfer of £3,900.

Without the remittance advice, the studio's bookkeeper would see £3,900 arrive and have to guess how it matched against £4,200 of open invoices.

Why it matters for your business

Remittance advices make accounts receivable easier to keep straight. Payments can be matched to the right invoices first time, so your aged debtor report is accurate and you do not chase customers for bills they have already paid. They also show you straight away when a customer has short-paid or deducted something you did not agree to.

If you pay suppliers, sending remittance advices builds goodwill and cuts down on "has this been paid?" emails. Most accounting software, including Xero and QuickBooks, can send them automatically from a batch payment.

Common problems it solves

The most frequent reconciliation headaches come from part payments, combined payments for several invoices, payments made under a parent company's name and deductions for returns or early settlement discounts. In each case the bank line alone does not tell you what happened. A remittance advice explains it in one document, so the bookkeeper can allocate the money correctly and raise a query straight away if the customer has deducted something you did not agree. Keep remittances with the bank transaction in your software so the trail is easy to follow later.