What is a ‘remittance advice’, and does your business need to produce them?
What is a remittance advice? A ‘remittance advice’ is a document or note to a supplier sent from customers informing them about the payment of their invoice. Remittance advice generally contain information such as invoice amount, invoice number, method of payment, and text notes. It’s important to know that remittance advice notes are optional and not…
What is a remittance advice?
A ‘remittance advice’ is a document or note to a supplier sent from customers informing them about the payment of their invoice.
Remittance advice generally contain information such as invoice amount, invoice number, method of payment, and text notes. It’s important to know that remittance advice notes are optional and not mandatory. They are, however, often sent as a mark of courtesy to sellers as it helps them match invoices with payments.
As remittance advice is optional, it can be sent in a number of ways. If the payment is done via cheque, then the remittance advice could be sent along with it. Remittance advice work as a proof of payment received, and so is equivalent to a receipt from a cash register.
Also, some businesses include a remittance advice note with the invoice, which the customer can send back to the seller along with the payment. In this age of e-commerce, online payment is increasingly popular – reducing the role and prevalence of the remittance advice. However, when dealing business-to-business, you could send a reminder through e-mail informing the seller about the payment.
Why is a remittance advice note useful?
When you make a payment to a seller or a supplier, you can send them a remittance advice showing the payment you have made against the invoice. This helps the seller match invoices with payments. It serves as a useful record for both suppliers and buyers, as it helps ease issues where matching a payment with an invoice is required.
Information you should put on a remittance advice
You should take care to put the following information on the remittance note.
- Invoice reference/s
- Amount you have paid against each invoice
All of the above are also important for any credit note included in the payment. You should also include detail about the date on which invoices are to be paid, or likely to be paid.
It is also advisable to print remittance advice on company letterhead that contains the number of the person to be contacted in case of any queries or questions. If you are in the construction industry you may be required to deduct Construction Industry Scheme (CIS) tax from payments to some suppliers. The best way forward is to speak to a qualified accountant in case you are unsure about whether this tax is applicable to you or not. Also, if CIS is applicable, you must take care to show it on your invoices.
How to issue a remittance advice
People are generally unsure about how to issue a remittance advice. There are a couple of options:
- Paper – if you make a cheque payment, it’s best to send remittance advice along with the cheque.
- Electronic – It seems that everything is moving online, and remittance advice is no exception. As most payments are made online, then considersending remittance advice notes by email.
Should I keep copies of remittance advice?
It’s certainly a good idea. Keep a careful record of all your remittance advices that have been sent to your suppliers – as well as those you receive from customers.
Keeping them in an orderly manner will help you more easily refer to them, in case of a query with the remittance advice in the future. Your accountant may also want to have a look at them during the preparation of your accounts to ensure there is no disparity between payment and invoices.