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What are remittance advices?

What is a remittance advice and why it is important to both customers and suppliers? This article explains all.

What is a remittance advice?

A remittance advice is a document which provides a breakdown of the invoices included on a payment. It is sent from a customer to a supplier letting the supplier know they have paid their invoice. 

In it’s simpliest form it shows the invoice number and payment amount sent or enclosed. 

When do I need to issue a remittance advice?

Whenever you pay a supplier you should also send them a remittance advice which shows each invoice and credit note you have paid and the total amount of the payment.

This allows the supplier to correctly allocate your payment against invoices, saving both the supplier and the customer time if they had to correspond with each other to reconcile payments.

What information should I put on a remittance advice?

The following information must appear: 

  • date
  • reference
  • amount of each invoice you have paid.

You should include the same information for any credit notes which are included in the payment. You also need to show the total amount paid and also the date the payment was made or is going to be made.

The remittance should be printed on company headed paper showing details of the person to contact in case of any queries.

If your business is in the construction industry you may be required to deduct CIS tax from payments to some suppliers. Speak to your accountant if you are unsure whether this applies to you as they would usually complete the relevant forms. If you do deduct CIS tax then you need to show on your remittance advice how much has been stopped on each invoice.

 

How can I issue a remittance advice?

A remittance advice can be issued in one of the following ways:

  • Paper

If you are paying by cheque it is common practice to send the cheque with a remittance advice.

  • Electronic

As with most other aspects of a business, remittances are now more commonly sent by e mail. If you are paying electronically the remittance should be sent at the time the payment is made.

Do I need to keep a copy of all remittance advices?

It is important to keep copies of remittances you send to suppliers and those that you receive from customers.

There may be a query with an invoice in the future which requires you to refer back to a remittance advice. Alternatively your accountant may want to see them when they prepare your year-end accounts to match up payments with invoices.

 

Interactive tutorial: Recording income

The step-by-step guide takes you through:

  • Types of income 
  • Documents used when goods or services are sold
  • Different payment methods
  • VAT – including limits and registration.

Click on the Start button below to read more. 

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