What is remittance advice? Types, benefits, and how to automate

Summary: 

• Remittance advice is a document a payer sends to the payee to inform them that payment has been made. It helps the payee reconcile their accounts.

• Remittance advice usually includes the date of payment, amount of the payment, invoice number or reference number, and account details.

• Newer technologies provide digital options for sending and receiving remittance advice, which can improve efficiency and reduce errors compared to traditional paper-based methods.

While experts predict that global remittances will continue to grow, the old ways of remittances are gone as digital methods, especially for cross-border payments, gain popularity. In the US alone, only 33% of business-to-business (B2B) payments are made by cheque.¹

This article will explore the importance of remittance advice, the benefits of digital solutions, and how businesses can implement tools to help simplify their financial operations.

What is remittance advice?

Remittance advice (also known as a payment advice or payment notification) is a document that a payer sends to inform a payee about a pending payment.

When a payer issues payment on an invoice, they provide remittance advice that details the amount, date, payment method, and relevant reference numbers or invoice details.

This document helps the payee reconcile the payment with their records, which can be useful for accounting and audit purposes. It’s also useful for international wire transfers and high-value ACH transfers because they often involve larger sums of money and multiple parties.

Clear, documented remittance details help ensure that both the payee and payer can easily track and reconcile the transaction, reducing the potential for errors or disputes.

Benefits of digital remittance advice  

As more businesses adopt electronic payment systems, the way remittance advice is generated, stored, and sent has evolved. For example, you can now send remittance advice via emails or through push notifications on your business banking app.

Here are some of the advantages of digitising remittance advice:

Improve speed and accuracy

The biggest benefit of moving to digital remittance advice is speed. You can send it instantly via email or through an online portal, ensuring that the payee receives the information quickly. Many digital systems can also automatically generate remittance advice, eliminating the need to generate them manually, improving your productivity, and reducing the likelihood of errors.

Standardise formats for global transactions

Digital solutions like Electronic Data Interchange (EDI) remittance are beginning to address inconsistent remittance formats by ensuring that senders include all necessary information with consistent formatting.

EDI helps automate remittance data exchange, reducing errors and providing a standard format that’s easy to understand and process across different systems and regions.

Better visibility on cash flow

With remittance advice in hand, you can leverage advanced data analytics tools that provide detailed insights into payment trends, delays, and other financial metrics. This can help you predict cash flow more accurately and make informed decisions to improve financial management.

Create transparency

You could also go one step further by implementing self-service portals for customers and vendors. Here, they can access remittance advice slips and other financial documents at any time without needing to contact you. This level of transparency improves customer satisfaction and reduces the administrative burden on your business.

Reduce the risk of fraud

You can secure digital remittance advice with encryption and authentication methods so that sensitive data does not go into wrong hands. Digital systems also provide a clear audit trail, which helps with compliance and digital resolution.

Types of remittance advice 

From handwritten notes to automated documents, here are the four common forms of remittance advice: 

What does a remittance advice document include?

The goal of remittance advice is to provide clear and detailed information about a payment. Most remittance advice documents include the following information to ensure accurate record-keeping and facilitate any necessary follow-up.

1. Payer information: 

• Company name (or letterhead)

• Company address

• A point of contact for inquiries regarding the payment or remittance

2. Payee information: 

• Company name

• Company address

• Contact details for the individual, team, or department that the payment/remittance addresses

3. Payment details:

• Date of payment initiation

• Amount paid

• Payment method (e.g., ACH transfer, wire transfer)

• Payment reference number

4. Invoice/service details:

• Invoice or account numbers

• Invoice dates

• Invoice amount

• Amount applied to each invoice

• Discounts or adjustments

• Outstanding balance, if applicable

5. Any notes or additional information

Remittance advice example 

The remittance advice example below includes the payee and payor details, date of payment, payment amounts, the expected deposit date, and key invoice details, such as invoice numbers.  

Optimise your transfers with remittance advice

Improving remittance processes can help you gain better insights into payment trends and delays. With this transparency, your financial team can make more accurate forecasts and improve decision-making about spending, which contributes to more effective cash flow management.

Airwallex Spend Management can help you remove the manual tasks related to sending remittance advice. It lets you automate remittance advice to suppliers or vendors, as well as integrate existing accounting software to easily track, manage, and reconcile your spend.

But managing and automating remittance advice is just one part of the picture. Airwallex also provides a fully integrated platform that comes with a multi-currency Business Account that enables you to make both domestic and international payouts for free or at interbank rates. This holistic approach offers you better financial control, efficiencies and oversight on a single platform.

Remittance advice frequently asked questions

Is remittance advice a refund?

No. A remittance advice slip, or remittance invoice, is a document notifying the recipient of a pending payment. While remittance advice most often regards payments, it can notify a business or supplier of an impending refund.

Do I deposit a remittance advice cheque?

If you receive a cheque along with remittance advice, then yes, you should deposit it. Check the remittance document to see which invoice or account you should apply the payment to.

Who issues remittance advice?

Anyone can issue remittance advice. Usually, a business sends remittance advice to a vendor or supplier when paying the invoice. However, a supplier can also send remittance advice form with their invoice. The receiving business can then fill out this form and send it back to the supplier.

Sources:

1. https://www.nacha.org/news/afp-survey-finds-businesses-actively-shifting-ach-and-other-electronic-b2b-payments