What is remittance advice? 

Remittance advice might sound like some complex financial jargon, but it’s actually a simple and practical concept that works together with an invoice. While a supplier sends an invoice to request payment for goods or services, remittance advice comes from the customer, confirming that a payment has been processed and often specifies which invoice it’s for.

Though it may seem like just a formality, remittance advice plays a key role in helping both parties keep their financial records organised, making it easier to track payments and ensure everything matches up.

In this article, we’ll break down exactly what remittance advice is—how it differs from remittance—and why it’s so valuable for businesses.

What is remittance advice and why does it matter?

Remittance advice is the information a customer provides alongside their payment to let their supplier know which invoice the payment is for. The term “remittance” refers broadly to a payment made for goods or services. It comes from the idea of “sending back,” so when we talk about “remittance advice,” we’re referring to those extra details that help clarify what the payment is covering.

Some businesses refer to it as a remittance slip. Typically, the customer (or recipient) fills out this slip and sends it back to the seller with their payment. It’s a small but a helpful step in keeping transactions clear and organised.

Read on to understand what remittance advice actually looks like and how it fits into payment processes.

What is the difference between remittance and remittance advice?

To “remit” a payment simply means to send it back—whether that’s paying a supplier, settling an invoice, or transferring money for goods or services. Remittance advice, on the other hand, is a little different. It’s a notification or document that provides proof that a remittance has been made (or is about to be made).

Now, you might wonder: is remittance advice proof of payment? The short answer is no. While it lets the payee know that a payment has been sent, it’s not official proof that the payment has been made. Auditors, for example, are unlikely to rely on remittance advice to confirm cash receipts. Instead, they are likely to turn to the transactions recorded in the ledger and the bank statement for that kind of verification.

So, while remittance advice is helpful for communication, it’s not the same as proof that payment has been made.

In short:

What should be included on remittance advice documents?

Remittance advice documents generally include a few key details, and many businesses use a standard template to make sure nothing is missed. It’s a good idea to include a reference or purchase order number alongside the vendor’s invoice number, making it easier to track the remittance advice later if needed.

A remittance generally includes:

Keep it simple—a basic Word document or PDF works just fine for most small businesses.

Example of how OFX sends remittance advice

At OFX we take care of sending remittance advice on your behalf. We will send a remittance advice directly to your suppliers when you send a payment. We also include the information of the beneficiary details.

See what a remittance advice sent from OFX looks like: 

Why is remittance advice important in business transactions?

Remittance advice plays an important role in helping both the seller and buyer keep track of their finances. It’s a standard part of record-keeping. Remittance advice makes it easier for sellers to match payments with their financial records, keeping everything organised.

What are the benefits of remittance advice?

Remittance advice simplifies record management and reconciliation for both buyers and sellers

For the seller:

For the buyer:

What are the different types of remittance advice?

Let’s talk about the different types of remittance advice and how they’re sent—it’s a bit more flexible than you might think.

Remittance advice can come in various forms, either as a physical document sent through the mail or a digital version delivered electronically. Here are some of the most common types:

The method of how to create a remittance advice depends on how you’re sending it:

There’s no standard format for remittance advice—it varies by company and payment method. For payments like ACH, wire transfers, or virtual cards, remittance advice often arrives separately, usually by email, and may require a bit of back and forth between supplier and purchaser through emails or phone calls.

The format and delivery method depend on what works best for both the sender and the recipient.

Common challenges with remittance advice

Remittance advice is crucial, but managing it is often tricky. Why? It arrives through various channels and formats—mail, email, Excel, or AP portals—and there’s no standardised format. This can make it a slow and frustrating process.

Adding to the challenge, many payments today are digital, and remittance advice may not be provided. Unmatched payments can sit unresolved for days or weeks, creating headaches for accounts payable teams.

Three common challenges are:

When all these challenges overlap—multiple invoices, deductions, and missing remittances—it becomes a major obstacle for accounts payable teams.

Automated remittance advice

There are a lot of advanced cash application tools and AP automation software, powered by AI and machine learning, that can now match incoming payments to open invoices without needing remittance advice. 

As more businesses adopt accounts payable software, you’ll likely see more customers sending remittance advice directly through their accounts payable systems for seamless integration.