Remittance advice
A note from a customer telling the seller which invoices a payment covers, and explaining any difference.
In short
- It is what lets the seller apply a payment to the right invoices.
- It often arrives separately from the money, by email or through a portal.
- Payments without remittance are the main cause of unapplied cash.
A remittance advice is a message sent with or alongside a payment. It lists the invoices being paid, the amount applied to each and any deductions, such as an early payment discount or a disputed charge. Buyers usually generate it automatically from their payment run.
Why it matters
Bank data rarely says enough. A deposit of $27,315 from a customer with twelve open invoices could match any number of combinations. The remittance tells the seller exactly which ones. Cash application is quick and accurate. Without it, AR has to guess, contact the customer or leave the payment unapplied.
How it arrives
- As an email, often a PDF, from the customer's accounts payable system
- Through a supplier portal the customer runs
- In the payment data itself, in a limited reference field or in richer formats that carry full remittance details
- As a stub attached to a mailed cheque
The challenge is joining the two halves. The money arrives at the bank and the remittance lands in an inbox, sometimes days apart. Businesses that collect remittances in one place, and match them to deposits automatically, cut unapplied cash sharply.
On the paying side, sending clear remittances is a courtesy that reduces calls from suppliers asking what a payment was for.
Worked example
Making sense of $27,315
A deposit of $27,315 arrives from a customer with 12 open invoices. Separately, the customer's system emails a remittance listing five invoices totalling $27,500, less a $185 deduction for a short shipment on one of them. AR applies the payment to those five invoices and opens a deduction for the $185, instead of guessing.