What is Remittance Advice?
Remittance advice is a notice a payer sends to a supplier stating which invoices a payment covers, the amount paid and any deductions. Also called a payment advice, it travels with or ahead of the payment so the supplier can apply the cash to the right invoices; it is not proof that the money arrived.
Why a Remittance Advice Matters
A payment without a remittance advice is cash the supplier cannot apply: one transfer covering eleven invoices, two credits and a short-pay lands as an unexplained lump, the supplier’s receivables team guesses or asks, and invoices AP considers settled stay open on the supplier’s statement. The cost comes back as disputes, duplicate reminders and a reconciliation that no longer agrees. AP owns the remittance detail on every payment run; treasury owns the payment itself. As an example, a company making 400 payments a month that covers an average of six invoices each generates 2,400 invoice applications for its suppliers every month; without remittance detail, every one of them is a question.
How a Remittance Advice Works
A remittance advice is generated from the payment run, because the payment run is where the invoices, credits and deductions behind each payment are decided.
- First, the payment run selects the open items to pay for each vendor, including invoices due, each credit memo to net, discounts to take, and any debit memo to deduct.
- Next, the system builds the advice for each payment. It identifies the payer and payee, payment date, method, and reference, followed by a line for each invoice or credit, including its number, date, and amount.
- Additionally, the advice explicitly states all deductions, such as early-payment discounts, short payments for disputed lines, and applied credits. This way, the supplier understands why the payment total differs from the invoice amounts.
- Once prepared, the system delivers the advice through the channel the supplier has registered, whether email, a supplier portal, the remittance field of the bank transfer, or an electronic remittance message sent alongside the payment file.
- Upon receiving the payment, the supplier applies the cash to the listed invoices. If the supplier cannot match any amount, it raises a query referencing the advice.
- Finally, AP files the advice with the payment. As a result, the next vendor statement reconciliation has the supporting evidence readily available.
Remittance Advice vs Proof of Payment
Comparison criteria |
Remittance advice |
Proof of payment |
|---|---|---|
| Issued by | The payer’s accounts payable | The payer’s bank, or the payee’s own bank statement |
| Says | What the payment is for | That the payment was made |
| Timing | With or before the payment | After the funds move |
| Used for | Cash application, deductions, reconciliation | Settling disputes about whether money was sent |
| Relied on by auditors | No | Yes |
Send the remittance advice with every payment, and keep the proof of payment for the occasions when a supplier says the money never came.
Example
Assume a payment run settles a supplier’s account with one transfer.
Line |
Reference |
Amount |
|---|---|---|
| Invoice | INV-3310, 2 June | $18,500.00 |
| Invoice | INV-3322, 9 June | $12,200.00 |
| Invoice | INV-3341, 16 June | $11,600.00 |
| Credit memo applied | CM-118, against INV-3310 | −$600.00 |
| Early-payment discount taken | 2% on INV-3341 | −$232.00 |
| Payment total | Transfer ref. 88214, 30 June | $41,468.00 |
In this example the supplier applies $41,468 across three invoices in one pass: two close in full, INV-3310 closes with the credit memo, and the $232 discount is recognised rather than chased as an underpayment. Without the advice, the supplier sees $41,468 against $42,300 of open invoices and opens a query about the $832 it cannot place.
Common Mistakes
- Paying several invoices in one transfer with no breakdown. The supplier applies the cash to the oldest items, which may not be the ones paid, and the statement disagrees.
- Leaving deductions unexplained. A discount or short-pay without a line on the advice looks like an underpayment and is chased as one.
- Sending the advice to the wrong contact. A remittance that lands with a sales rep instead of receivables is the same as not sending it.
- Treating the advice as proof of payment. It says what was intended; only the bank confirms what happened.
How Reconiva Handles Remittance Advice
Reconiva posts invoices, credit memos, and approved deductions to the connected ERP with the references required for payment processing. As a result, the ERP’s remittance advice lists each invoice, credit, and discount behind a payment rather than showing only a total. Moreover, Reconiva stops duplicates and links credits to their original invoices before posting. Consequently, suppliers can reconcile the remittance advice with the documents they already hold, while the audit trail connects each payment to the approvals behind it. See ERP integration in Reconiva.