Payments coming in is always good news… until you can’t figure out which invoices they belong to.
This doesn’t mean you’re bad at bookkeeping, though. You’re just missing a detail called remittance information. It’s what ties every payment to the right invoice so you don’t waste hours on reconciliation.
Once you get it right, you can enjoy smoother payables and cleaner cash flow. Let’s explore how it works and how you can start using it like a pro.
Table of Contents
Remittance Information Made Simple
Remittance information tells the seller what a payment is for. It’s like a customer’s note that lists which invoices were paid, how much, and when.
Depending on your accounting setup or region, it can also be referred to as remittance advice or remittance detail. Here’s how it may show up as:
- Paper slip
- PDF attachment
- Bank file
- Automated message from payment system
Regardless of the form, it’s supposed to help you understand why the money arrived and where it should be applied. Think of it as a receipt from your customer.
Why Every Payment Needs Remittance Info
Imagine receiving 50 payments in one day and none of them have notes or invoice numbers. Without remittance info, you’re stuck guessing which payment goes where.
Remittance advice helps both you and the customer by providing important context to payments. That means less confusion and fewer errors when reconciling.
It might seem like extra work now, but it saves everyone a lot of hassle down the road.
- For payers:
It keeps your inbox quiet. You won’t have to deal with emails asking which invoice the payment covers.
Sending remittance details also minimizes disputes and keeps vendors happy. They’re bound to trust you more when your payments are clear and consistent.
- For payees:
Remittance information is the key to smoother reconciliation. With it, you won’t have to waste time matching payments to invoices. You won’t have to guess, either. You just know where they belong.
It allows for better cash visibility because you can always see what has been paid and what hasn’t. This means you can also follow up payments before a customer delays or, worse, defaults.
- For finance teams:
Remittance advice allows for a faster month-end close. There are no errors or unmatched entries to worry about, so you’re not stuck chasing discrepancies.
Audit trails also stay transparent. Everything is traceable, which means your records are always clean and audit-ready.
What Goes Into a Remittance Advice
Suppose you get invited to a party you really want to go to. Except the host only gave you the name of the hall where it will be held, not the directions to get there. You can look it up on your own or guess where it’s located, but you’ll be wasting time trying to find it.
That’s what a payment without remittance info is like. Payments easily get lost or mismatched when they don’t have any key details to accompany them.
To prevent errors and make the process more efficient for everyone, it’s important to know what goes into a clear remittance advice. Here’s what it should include:
Detail | What It Means | Why It Matters |
Payer Information | Name & contact of customer or company sending the payment | Clarifies who made the payment |
Payee Information | Name & contact of vendor or business receiving the payment | Ensures the payment is credited to the correct account |
Invoice Details | Number & amount of the invoice(s) that the payment covers | Tells exactly which invoices the payment should be applied to |
Amount Paid | Total amount of the payment | Confirms whether the received amount is correct |
Payment Date | When the payment was made | Verifies timing for accounting and reconciliation |
Payment Method | Mode of payment used (ACH, wire, check, card, etc.) | Provides context into the nature of the payment |
Reference Number | Payment ID or transaction code | Makes the transaction traceable in bank or payment systems |
Discounts/Adjustments | Any deductions or credits applied to the payment | Makes sure balances are accurate after adjustments |
Notes/Special Instructions | Extra details/context for the payment | Reduces confusion and minimizes disputes |
Tip: Standardize your remittance format. This makes it easier to automate matching in your accounting system later on.
Where Remittance Information Fits in the Payment Journey
Details are your lifeline in every accounts payable (AP) or accounts receivable (AR) process. This payment journey tracks what happens between when an invoice is sent and when the payment is received.
Remittance information clarifies details from the start, so you know exactly which invoice the payment applies to. Here’s where it fits in the AP/AR workflow:
Step 1: The vendor sends the invoice for the delivered goods or services.
Step 2: The buyer reviews and approves the invoice.
Step 3: The buyer makes the payment.
Step 4: The buyer sends the remittance information.
Step 5: The vendor receives the payment and remittance information.
Step 6: The vendor applies the payment and closes the transaction.
Remittance details are crucial to successfully close an invoice. Otherwise, you’d waste hours matching transactions and fixing errors you could have avoided altogether.
4 Ways to Botch a Remittance (and How to Stop Doing It)
The most common remittance mistakes are due to inconsistency. Not because it’s too complicated, but because you don’t have clear guidelines for it. The resulting errors are easy to overlook, and that’s how they turn into major issues that are costly to fix.
Let’s go through what usually goes wrong with remittances and how you can fix them ASAP.
Missing or Incomplete Details
A missing invoice number or reference code makes reconciliation more difficult. You’d have to check your records one by one to match a payment to its invoice.
Incomplete details ultimately defeats the purpose of sending remittance information in the first place. Apart from the extra work, it takes up valuable time and resources.
To make sure you receive complete remittance advice every time, set up a standard format or template. You can also have your accounting platform fill in the basic details for you.
With a consistent format, closing transactions becomes a lot easier and faster.
Separate Communication Channels
Sometimes, a buyer would send a payment via bank transfer then send the remittance info through email. Unfortunately, if you handle a high volume of clients, these can easily get mixed up.
There’s a bigger risk of mismatches if payments go through one channel and remittance details go through another. Worse, they can get lost in someone’s spam folder.
The best way around this is to have your customers send the payment with the remittance details in your accounting platform.
By providing this solution, you ensure payments and details always arrive together. It also means less room for mismatches and other errors.
Unstandardized Formats
Remittances may show up in formats like PDFs, spreadsheets, or plain numbers in an email. And when every file looks different, even the best system will struggle to process remittance data.
Different formats mean more errors and slower closes. They also lead to more manual interventions since the automation wouldn’t work well.
Again, to fix this inconsistency, stick to a single format such as EDI 820 or any system-generated file. This gets everyone on the same page and makes it easier for automation tools to read the data.
Timing Mismatches
The thing with remittance data is it’s only useful when it arrives at the right time.
When it’s too early, it throws you off because the payment isn’t there yet. And when it’s too late, you’ve most likely already wasted time matching the transaction manually.
Ask your customers to send remittance advice right after the payment gets confirmed. This way, your records won’t be out of sync, and reconciliation becomes a lot smoother.
How to Use Remittance Information the Right Way
There is an art to remittance, and it’s all in the proper timing and structure. Check out these best practices to make the payment process as seamless as possible for everyone involved:
- Set clear expectations from the start.
Prevention is better than cure. So, before anything else, let your clients know exactly what you need from them. Tell them what details to include in the remittance information and how you want them to send it to you.
Having a standard procedure means more efficiency. It’s easier for your clients to comply when they know what’s expected of them.
- Fix discrepancies immediately.
When remittance information doesn’t match your records, reach out to your customer right away. Send them an email or give them a call to verify the details they sent.
It’s best to address issues the moment you spot them. Make sure to clearly communicate the matter to the client so you can avoid disputes. Staying calm and level-headed also gets you far in maintaining a good client relationship.
- Reconcile more often.
Instead of a month-end close, try to reconcile weekly (or even daily). By doing so, you can catch errors more quickly and resolve them before they become bigger.
If you can, match payments to invoices as soon as you receive them in your system. This lessens confusion and keeps your books clean.
- Connect your systems.
Without proper integration, invoices and payment records may be isolated from each other. This means data could easily get lost or mismatched. And when that happens, you’d end up having to do manual checks.
Integration ensures records stay accurate and consistent across your bank and accounting or ERP systems. Simply put, you’ll always be able to match a payment with the correct invoice even if the data is on different platforms.
- Automate your process.
Finance tools these days have built-in automation features. They can automatically process remittance information and match payments to invoices in seconds. What’s even better is these tools do it with more accuracy.
So if you’re still matching transactions manually, you’re misallocating your time and resources. It’s like cutting your wings and passing up on the chance to grow your business.
FAQs About Remittance Information
Is remittance information the same as proof of payment?
No. Proof of payment shows that the money was sent. Remittance information explains what the payment is for. It details which invoices it covers and how it should be applied.
Is remittance advice required for every payment?
No, it’s not legally required. But it’s highly recommended. Without it, vendors waste time guessing which invoice(s) the payment covers.
Can remittance information be sent separately from payment?
Yes. But when payment and remittance travel through different channels, they can easily get separated. It’s best to send them together through the same platform.
Who receives remittance advice?
The vendor. Remittance advice comes from the customer, and its main purpose is to give the vendor more context into the payment made.
How do you send remittance information?
It can be sent by email, paper, or EDI file. In some cases, customers can automatically send remittance info through the vendor’s payment platform.
What’s included in remittance information?
Remittance advice often includes the payer name, vendor name, invoice numbers, amounts, payment date, and any discounts or adjustments.
What’s the difference between remittance advice and an invoice?
An invoice is a request for payment. Remittance advice is a response. It tells the vendor which invoice(s) were paid and how much was covered.
Make Every Payment Count
Assembling IKEA furniture without the manual? It’s possible. But it’s also confusing and stressful. It can be done, but it takes such a long time to get it right.
That’s what it’s like to reconcile payments without remittance information. These details may not seem like much, but they are vital to matching transactions correctly.
When there’s remittance advice to go with every payment, everything becomes smoother. You close faster. You have less errors to fix. You keep your records clean and audit-ready.
Pair that with automation and watch it take care of the job for you. Then, getting enough sleep even at month end won’t seem too far-fetched. It can become your norm in no time.
Book a demo with us so we can show you how to make your next reconciliation your easiest one yet.