A remittance advice stops a supplier chasing money you already sent
It is the note that goes with a payment saying which invoices the money is for.
This is the mirror image of a statement. There, you are owed and you are listing it. Here, you are paying and you are explaining it. Send 8,400 to a supplier with no breakdown and their accounts team has to guess which of your six open invoices it covers. They usually guess wrong, allocate it to the oldest, and then chase you for something you have already paid.
One page listing the invoice numbers and amounts removes all of it. It costs you two minutes and saves a phone call, and on a supplier account you use every week it is the difference between clean books and a permanent low-level argument.
Why a bank reference is not enough
Because you get about eighteen characters, and a payment run covering five invoices does not fit.
"INV1042-1051" looks like it says something, but their system will show a single receipt against your account with no allocation. Part payments are worse: pay 3,000 against a 4,200 invoice with no explanation and it is anybody's guess whether you are disputing 1,200, paying in stages, or have made an error.
What to put on it
- Their invoice numbers, exactly as written. Your internal reference is no use to them.
- The amount against each invoice. This is the whole point. It has to add up to what left your bank.
- The payment date and the total. So they can match it to the receipt.
- Any deduction, and why. Retention, an agreed credit, a contra charge. An unexplained short payment gets chased every time.
- Your account reference with them, if they gave you one.
Deductions are the part that matters
If you are paying less than the invoice, say why on the remittance rather than leaving them to work it out.
In construction this is constant: retention held under the contract, an agreed credit for materials returned, a contra charge for something you had to put right and, in the UK, CIS deducted from a subcontractor's labour under the scheme. Each of those is legitimate and each looks identical from their side without an explanation, which is a short payment.
For CIS in particular the subcontractor needs the deduction figure for their own records anyway, so a remittance that states it saves them asking. That is a monthly statement obligation in its own right, and the CIS monthly run handles the formal version.
Send it to the right place
Accounts, not your contact on site. The person you deal with day to day cannot allocate a payment.
Send it the same day the payment goes out, not when it clears. Their team is reconciling receipts as they land, and a remittance that arrives three days later has already caused the query it was meant to prevent.
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Common questions
What is a remittance advice?
A note sent with a payment saying which invoices it covers. It is the mirror image of a statement of account: a statement says what you are owed, a remittance advice explains what you have just paid.
Why is a bank transfer reference not enough on its own?
Because a bank reference gives you around eighteen characters, and a payment covering five invoices will not fit in that. The receipt lands as a single unallocated amount, and a part payment with no explanation leaves the supplier guessing whether you are disputing part of it, paying in stages, or have made an error.
What should a remittance advice include?
The supplier's own invoice numbers exactly as they wrote them, the amount allocated against each one, the payment date and total, any deduction and the reason for it, and your account reference with them if they gave you one.
Why does a short payment need an explanation?
Because a deduction such as retention, an agreed credit, a contra charge or, in the UK, a CIS withholding, looks identical to an unexplained short payment from the supplier's side. Stating the reason on the remittance is what stops it being chased as an error.
Who should a remittance advice be sent to?
Accounts, not your day-to-day site contact, because the site contact cannot allocate a payment. Send it the same day the payment leaves your account rather than waiting for it to clear, since the supplier's team reconciles receipts as they land.
Does sending a remittance advice cost anything?
No. It is free, with no account, no email address and no watermark, and there is no limit on how many lines it can have. It is generated in your browser, so the payment details never reach a server.