Remittance Advice: What is a Remittance Notice?

Keeping track of finances can be a bit of a headache when you're running a busy business, but there’s a hack to make it a whole lot easier.

In this guide, we'll walk through everything you need to know about remittance advice and how it can help streamline your payment processes.

What is Remittance Advice?

Remittance advice – also known as a ‘remittance notice’ – is a document sent by the payer to the payee. Think of it as a friendly note that helps make sense of a payment.

At a minimum, remittance advice details the amount that was paid, the date of the transfer, and which invoices have been settled. Essentially, it serves as a record that helps both parties keep track of transactions and ensure everything lines up correctly.

How Does Remittance Advice Differ From an Invoice?

The terms ‘remittance advice and ‘invoice’ often get mixed up, but they serve different purposes. An invoice is a request for payment issued by a seller, outlining what’s owed for goods or services. Remittance advice, on the other hand, is sent by the buyer to the seller. It confirms payment and specifies which invoices have been paid. Think of it as closing the loop on a transaction.

Learn more about small business invoicing.

When Is Remittance Advice Used?

Remittance advice is typically issued in business-to-business transactions where multiple invoices or bills are being paid at the same time. It’s particularly valuable when:

• A single payment covers multiple invoices
• Partial payments are being made on outstanding invoices
• Payments are made via bank transfer or other electronic means
• There's a need to maintain detailed records for accounting and reconciliation
• Businesses have regular, ongoing financial relationships

A well-structured remittance advice makes it easy to quickly match payments to their corresponding invoices, reducing confusion and administrative work.

Is Remittance Advice Mandatory in Australia?

No, sending remittance advice isn’t legally required in Australia, but it’s a smart practice. Many businesses rely on it to prevent misunderstandings and keep their bookkeeping accurate. While you’re not obligated to issue remittance advice, it can help build trust with other businesses.

Types of Remittance Advice

Businesses may request different types of remittance advice based on their payment processes and record-keeping preferences. Depending on the scope of your services, you might prefer detailed remittance advice with invoice breakdowns, or request a simple confirmation of payment.

Let’s break down some examples of a remittance advice documents that you might request from your buyers:

• Basic remittance advice: This is your no-frills option – a simple document or email that lists what you're paying for. It's perfect if you’re looking for something straightforward and effective.
• Removable invoice advice:  Remember those old school tear-off slips at the bottom of bills? That’s this type of remittance advice! It’s attached to the invoice and should be returned by the payer along with their payment. Removable invoice advice is great for businesses that still deal with paper cheques and manual processing.
• Scannable remittance advice: Welcome to the 21st century! These include barcodes or QR codes that can be scanned to automatically update accounting systems. If you're handling lots of payments, going digital can be a real time-saver.

Benefits of Using Remittance Advice

Remittance advice isn’t just a formality – it’s a handy tool that makes life easier for both payers and payees. Whether you're a business owner keeping tabs on multiple transactions or an individual paying off invoices, remittance advice helps to create a clear record of payments.

Here are some of the main benefits:

• Enhanced payment tracking and reconciliation: Remittance advice provides a clear paper trail to easily track payments and reconcile accounts – minimising the risk of accounting errors!
• Improved communication between payers and payees: Remittance advice provides clear and detailed information about what a payment covers, reducing the need for follow-up queries.
• Fewer errors in financial records: When payments are precisely documented, there's less chance of mistakes creeping into your books. This means fewer corrections and adjustments down the line. 
• Streamlined auditing processes: You can easily verify payment histories during audits by referring back to remittance advice that you’ve sent and received.

How to Create a Remittance Advice

Creating remittance advice doesn't have to be complicated. Here’s a simple approach to give your payees all of the details they need:

1. Decide on the format (electronic or paper-based): Consider what works best for both your business and your recipients. Electronic remittance advice is generally more efficient and environmentally friendly, but some businesses prefer paper documentation.
2. Collect all relevant payment and invoice information: Gather details about the payment amount, the invoices being paid, any partial payments, and any special instructions. Being thorough at this stage prevents confusion later.
3. Organise the information: Arrange the details in a way that makes it easy to understand the information at a glance. Group related info and use clear headings to separate different sections.
4. Include all necessary details: Make sure you've covered all the essential elements (we’ll go through these in a moment).
5. Review for accuracy before sending: Double-check all the details, especially invoice numbers and payment amounts. A small error can cause big headaches for both you and the recipient.
6. Maintain copies for your records: Save a version of each remittance advice you send, either electronically or in hard copy. These records will come in handy during tax time.

Want to make it even easier? Accounting software like QuickBooks Online can automatically generate remittance advice when you send a payment.

What Information Should be Included in a Remittance Advice?

Wondering what a good example of remittance advice looks like? Let’s look into the important info that you should include every time:

• Your details: Who's making the payment? Include your business name, contact details and ABN.
• Their details: Who's getting paid? Make sure their business name and address are clear.
• The payment specifics: How much, when and how you paid.
• Invoice details: List out all the invoice numbers being paid, with amounts for each.
• Account numbers: Include reference numbers that help identify the transaction.
• Notes on special cases: If you're making a partial payment or applying discounts, explain why.
• A clear total: The final payment amount should be prominently displayed and easy to read at a glance.

How to Send a Remittance Advice

You should quickly follow any payment with remittance advice, meaning you should choose a delivery method that’s fast and efficient. Here are some ways to get your remittance advice into the right hands:

• Email: Quick, easy and environmentally friendly. Plus, it's searchable later when you need to find a particular remittance advice.
• Through your accounting software: QuickBooks can automatically send remittance advice when you make a payment – it couldn’t be easier.
• Traditional mail: Sometimes the old ways work best, especially if your recipient prefers physical documentation.
• Through a customer portal: Some businesses offer secure online spaces where you can access all your payment information in one place.

Best Practices for Managing Remittance Advice

Whether you're juggling multiple invoices or keeping track of individual expenses, creating a remittance advice system will simplify your bookkeeping.

Here are some helpful tips to make remittance advice easy:

• Create a template: Develop a standard format that you can use each time.
• Embrace automation: Let accounting software like QuickBooks generate and send remittance advice – it's faster and less prone to human error.
• Go digital with storage: Keep electronic copies that you can easily search and access when needed. No more digging through filing cabinets.
• Send them promptly: Don't leave your recipients guessing – send the remittance advice as close to the payment time as possible.
• Be consistent with references: Use the same numbering systems and references to avoid confusion.
• Ask for feedback: Check in with your recipients occasionally to make sure your remittance advice documents are providing enough information.
• Keep security in mind: When sending electronic remittance advice, make sure you're using secure methods to protect sensitive information.