The advent of modern payment solutions is not just for simplifying our work. It also brings clarity and transparency to the process. As we talk about transparency, we have to include both payee and payer. Buying goods from someone, receiving an invoice, and then entirely ghosting them is not advisable in the financial sense. That’s where remittance advice comes and lends a helping hand.
It aids in establishing communication with the vendor regarding the processed payment. If you sell goods to other businesses, you know the shortcomings in matching received payments with sent invoices. Remittance information helps you determine where a settlement comes from.
Remittance advice is a document that a buyer sends to the vendor to notify them of the processed payment. Once the vendor releases an invoice, they look forward to receiving payment from the payer. But this is not the only invoice they have sent out. Matching invoices to received amounts is often a headache for them. But when they receive remittance receipts as proof for remittance transfer from the buyer, you can assure them that their invoice is processed and payment is made.
This remittance receipt document carries data such as invoice number, the amount paid, personal notes from the buyer, mode of payment. Some companies send out manual invoices and receive check payments too. For them, this will be a delight as they receive notification in advance.
In a mundane world, a buyer buys goods from a vendor, receives and processes invoices, initiates the payment, and then sends payment remittance advice to the vendor with remittance information.
There is consistent evolution around accounting and payment methods. If you have observed, small and medium-sized businesses are moving from traditional payment methods like a check to digital payment solutions, ACH, wire transfer, and remittance transfers through online wallets.
As a rule, remittance advice has always been sent along with the check to the vendor. As we are leaning away from the check/cash payments, why is a remittance receipt still in the picture? Does the payment receiver ever need remittance details? Let’s see.
Many small businesses do away with remittance advice as they see it as an unnecessary step. For a fact, a remittance advice slip is not completely necessary, but it is an act of courtesy. Vendors can sometimes get anxious when they don’t see the payment reflected in the bank account. It shows your vendor that you acknowledge their pain and assures that the payment is made.
It is extremely important to maintain decent relationships with vendors and other business partners as a small business. As money plays a crucial role in this goodwill, the respect and trust factor always hangs in a loose thread. Nevertheless, you can secure this bond and lay an indestructible, stable foundation with timely communication through a remittance receipt.
Similar to what has been painted in the introduction section, matching invoices with the received payment is quite a task. But with a remittance advice slip, they can track where the amount is coming from. So, remittance details will benefit them in auditing the most.
There are two ways to send a remittance receipt. One is through physical mail, and the other is through electronic mail. While sending, make sure it is addressed to the accounts receivable department as they handle this.
Like the name says, it’s the basic document that only carries the invoice number and payment date. Since it’s simple and basic, it doesn’t take much time to create and has every information needed. It is a printed paper that often accompanies the check leaf sent by the buyer to the vendor.
Invoice advice is a document that the vendor sends along with the invoice. This way, there is no additional burden from the payer side. After separating the invoice advice from the invoice, they can fill in the remittance advice slip. And then send it along with the filled check or send it electronically if it’s a digital money transfer.
Companies no longer store and maintain physical records now and are inclining more towards digital storage mediums. This scannable payment remittance type allows them to scan and store to let your vendors keep digitally.
Remittance advice can find its application in any sector that sends and receives payment. Following are the three common areas where they are in use the most.
As the name has it, the bank sends this remittance slip. There are cases when the bank makes payment on behalf of their account holders. So this bank remittance is sent by the bank to the payment receiver, which will carry the information like payment date, sender details, etc.
Business remittance transfer happens between two businesses. As discussed earlier, companies process the invoice of their vendors and remit payment. To notify that, they send business remittance advice to the vendor company. It can also be sent from employers to employees to post the salary or reimbursement credits to inform them.
Insurance remittance advice is a confirmation message sent by insurance provider companies to their customers when they appeal for a claim along with required documents. There are times when a claim can get rejected even if the documents are in the right place. When they don't see the payment on time, they think of the wrong possibilities.
A little googling can bring you a lot of unauthorized and outdated templates (Good stuff is never for free). But to do this right, you should be aware of what to include in your standard remittance advice template and what not. If you plan to send remittance advice, here are the remittance details to include as a must.
The document receiver should know where the remittance receipt is coming from. So, this field should let you write your company name, address, and contact details.
Now address the company you remit payment to, along with their contact information.
An invoice number is essential because, this is what is going to pull up your records. The accounts team can bring out the invoice sent to you and mark it as paid, attaching the remittance advice.
Add the payment due date and the date you have sent out the remittance.
Though you include the invoice number, it is also okay to add the paid amount as they can cross-check their bank account.
Including the payment mode is going to level up the transparency. Whether it is an accounts transfer, check or google pay, do mention it. They can be better prepared and be sure of where to expect your future payments. Expected date of payment delivery. Each payment method consumes its amount of time to process a payment. You can include an assumed date of when it will reach the vendor.
Each payment method consumes time to process a payment. You can include an assumed date of when it will reach the vendor.
If employers send the remittance advice, it should contain the following remittance details.
-Net and gross salary
-Employer and employee information
-Additional allowances are provided for overtime, the sixth day, and other reasons.
-Deductions and employee contributions
Now that you have your template and created your remittance advice slip let’s look into how you can pass this to your vendor. Before you finalize your sending method, see below the kind of format you can adapt to.
Paper: Though it’s old school and a little inconvenient, it still does the job pretty well. Here you will print it on paper and send it.
PDF or digital document: When you digitally create the remittance advice on your computer, send it.
Software: There is much affordable software that can instantly create and send customized remittance slips.
Some vendors send the remittance slip along with their invoices. It happens both in physical and digital form. You need to fill it in and send it to the mentioned address.
You heard it right. Fill down the slip in a paper and send it by post to your vendor’s address
Sending by email is easy and can be done in a minute. And it’s much faster than a physical post that takes days to reach. And now you should know to which email address you should send this. Plus, you have a copy of it too in your sent items.
Even email takes a few minutes to compose and send. But software does it automatically when you key in details. And there are specific payment management platforms and ERP systems that can instantly generate the remittance receipt and send it as well.
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