What is remittance advice?

Remittance advice is a document a customer sends to a supplier to tell them that a payment has been made and which invoices it covers. It lists invoice numbers, amounts and any deductions so the supplier can apply the payment correctly.

How it works

When a client pays several invoices in one transfer, your bank statement shows only a single amount. Remittance advice tells you what it is made of.

A typical remittance advice includes:

• The payer’s name and the payment date.
• The payment method and a reference or transaction number.
• The invoice numbers paid and the amount applied to each.
• Any credits, discounts or short-pay deductions.
• The total payment amount.

On your side, the job is reconciliation. Match each paid invoice to the advice, mark it paid in your records and flag any difference. Good records keep your accounts receivable accurate and stop you from chasing invoices that are already paid.

If the client does not send remittance advice, ask for it, or send a statement of account listing open invoices so they can confirm which ones they are paying. Quoting your invoice number on each invoice, plus a PO number when one exists, makes the payer’s job easier.

Example

A client pays $5,250 by bank transfer. Their remittance advice says:

Invoice	Invoice amount	Applied
INV-0301	$2,000.00	$2,000.00
INV-0302	$1,500.00	$1,500.00
INV-0303	$2,000.00	$1,750.00
Total		$5,250.00

INV-0303 was short-paid by $250. The advice shows the shortfall, so you can ask the client why. Perhaps a credit applied or a deduction was taken. Until it is explained, INV-0303 remains $250 outstanding. You can calculate any late charges on that balance with the late fee calculator, and create clear invoices with the invoice generator.

Related terms

• Accounts receivable: the invoices you are waiting to be paid.
• Statement of account: a list of invoices and payments for one client.
• PO number: a reference that helps the payer match your invoice.