The larger your business, the more complicated your accounting can become.
If you want to send multiple invoices at the same time, loan or Cash advance service Through Shopify Capital When you start financing your inventory purchases or taking large orders from wholesalers, it can become difficult to keep track of the money going in and out of your account.
These movements of money are called remittances, and they are used for a variety of purposes, such as completing a purchase, paying off a loan, or even giving it to someone else. A remittance essentially means sending funds, but when the money appears in the recipient’s account, the purpose of the transfer isn’t always clear.
In this guide, we’ll explain what remittance advice is, how it works, and some basic tips for managing the remittance advice process.
What does a remittance advice mean?
A remittance notice may sound like sage advice your parents gave you, but in reality it’s just a notification of an impending or already processed transfer and usually includes the purpose of the transfer.
For example, a remittance advice may state that payment for a particular invoice will be made via bank transfer. Or it may be used to inform a business that a credit card payment will be applied to a particular order. It may be easier to understand if you think of the word “advice” as an advice. A remittance advice informs you of a transfer, or the sending of money.
Do businesses need to send remittance advice?
Businesses are generally not required to send remittance advice unless required by their own policy or their customers’ policies. There is no blanket law requiring businesses to send remittance advice, but certain areas or sectors, such as the healthcare industry, may have relevant regulations or guidelines regarding how remittance advice should be used.
But even if they aren’t required, remittance advice can be an important part of efficient accounting, especially as your business becomes more complex. The remittance advice that your business receives often contains not only the payment amount but also other important information such as check numbers, purchase order numbers, invoice numbers, distribution center numbers, store numbers, and more.
When sending remittance advice, the company: payment To your suppliers. Sending notifications at the same time as payment may seem like overkill, but it will save you time in the long run.
What’s included in the remittance advice
A remittance advice typically contains important information about the payment you need to make and is in many ways similar to what you would find on an invoice.
However, a remittance advice can apply to multiple invoices and specify what the payment is for – that is, an invoice may contain information such as work provided and the amount due, but a vendor may send a customer two invoices for different orders and a remittance advice applies to the overall amount due.
A remittance advice note often refers to a removable piece of paper that can be sent back with a payment, whereas an invoice is something the customer keeps. However, some businesses may apply the term remittance advice note to electronic remittance advices as well as paper remittance advices.
In any case, a remittance advice letter will usually contain the following:
- Payer information (e.g. customer name and contact information)
- Recipient information (e.g. supplier name and contact details)
- Invoice number, informing both parties what the payment applies to.
- The amount due, which may apply to a specific order or to multiple orders.
- Details of the purpose of the payment (e.g. description of the goods or services provided, order date, date of execution, etc.)
- Acceptable payment methods/procedures. For example, let customers know the payment methods (check, credit card, wire transfer, etc.) and the payment terms (payment upon receipt, etc.).
Having a physical remittance advice that can be detached and returned allows patients to provide payment instructions, such as when paying a doctor, such as by providing a credit card number so that the doctor’s office can process the payment when it receives the remittance advice.
Types and examples of remittance advice
Remittance advices come in a variety of formats. The choice depends on factors such as your company’s technology, including the use of enterprise resource planning (ERP) software that facilitates electronic remittance advices.
Your choice may also depend on customer preference, such as a doctor who mails a bill to a patient including a remittance advice so that the patient knows how much the practice will receive when they send payment.
EDI Remittance Advice
Electronic Data Interchange (EDI) is essentially the digital language that some businesses use to send documents directly from one system to another. With the right software and APIs to integrate your systems, you can directly view your customers’ remittance advice or send these advices to your suppliers. ERP system.
Remittance email notifications
Email remittance advices are similar to EDI remittance advices, but instead of being sent directly between software platforms, email remittance advices are sent by email.
However, remittance advice sent by email may be less formal, such as when it is used only to specify which invoice a payment applies to.
Remittance advice
Some companies send paper remittance advices, which are similar to electronic remittance advices but in a physical format.
For example, if you pay by check in the mail, your business may print a paper remittance advice and send it in the same envelope, or you may designate payment for medical expenses using a standard paper remittance advice, as in the example below.
Removable invoice advice
Detachable invoice advice, also known as a remittance advice, refers to a remittance advice that is usually attached to an invoice.
The form or slip can be removed by the recipient and returned with the remittance. For example, a patient might receive a detachable bill notice from their doctor that is attached to their bill. The top of the paper clearly states what is being charged, and the bottom has a section that can be torn off and returned with the payment.
What is the difference between a remittance advice and a proof of payment?
While remittance advice and proof of payment often overlap, the terms generally differ in the following ways: The main difference is that a proof of payment focuses on the details of the payment, while a remittance advice often includes other information about the related order.
The main differences are:
| Remittance advice | Proof of payment | |
|---|---|---|
| the purpose | Specify the purpose of the payment or transfer. | Verify that the payment has been made. |
| Information included |
|
|
| Common Use Cases | If multiple invoices are outstanding, let your vendors know that payment is on its way. | We will verify that payment has been made and provide you with proof of tax. |
Common challenges with remittance advice
While remittance advices simplify accounting, they can also create new challenges. Common challenges include:
- Confusion regarding remittance advice format: Because there is no universally accepted format for remittance advice letters, confusion can arise when different companies include different information and terminology on their remittance advice letters. To avoid this issue, don’t be afraid to ask your customers and vendors what they prefer.
- Interoperability issues when receiving remittance notifications: As well as confusion over different formats, how payers want to send remittance advices can create technical issues with receiving them. For example, EDI remittance advices are popular and convenient, but if a company isn’t set up to receive the proper remittance advices, ERP softwarethat can be a problem, so you may need to adjust Technology stack accordingly.
- Security concerns: Because remittance advices can contain sensitive information, such as bank account numbers, it’s important to consider security measures, just as you would if you were processing actual payments. For example, you can choose an EDI remittance advice software provider that uses encrypted messaging, such as Secure File Transfer Protocol (SFTP). Or, if you send paper remittance advices, you can minimize the amount of sensitive information they contain.
The best way to send remittance advice
The best way to send business remittance advice is to ask the other party what they prefer. Sending EDI remittance advice may be the most efficient way, but it won’t do your supplier much good if they can’t receive that format.
Or, your company may be accustomed to sending paper remittance advices and that may seem like the best solution, but it could pose a risk to your partners as they would have to manually enter the information sent.
Keep in mind that remittance advice is intended to simplify the accounting process and minimize the back-and-forth communication required to reconcile payments, so the best remittance advice is the one that is easiest for all involved parties.
Money Transfer Advice FAQs
What does a remittance advice mean?
A remittance advice is a document that notifies the recipient of a payment, usually an international remittance, and includes details such as the remittance amount, the payment date, and the recipient’s account information.
Who receives remittance advice?
The payee or recipient typically receives a remittance advice along with the payment advice itself. If you’re sending a business remittance advice, the payee is likely an accounts receivable officer.
Why would you accept a remittance?
Remittances are money sent to you for goods and services or for personal reasons, such as financially supporting a family member. It is a common way to move money around.
Is a remittance advice the same as a receipt?
A remittance advice is different from a receipt. A remittance advice is simply a way to inform the recipient of the transaction details before any money is actually transferred. A receipt is a confirmation of payment.
This article focuses on industry standards and is not specific to Shopify’s financing product suite. To understand Shopify’s lending product capabilities, see: shopify.com/rental.
Available in some countries. An offer to apply is not a guarantee of financing. All loans through Shopify Lending, including Shopify Capital, are issued by WebBank in the United States.
*Shopify Capital loans must be repaid in full within 18 months, with two minimum payments within the first two six-month periods.
This article focuses on industry standards and is not specific to Shopify’s suite of financing products. To understand Shopify’s lending product capabilities, see: shopify.com/rental.
Available in some countries. An offer to apply is not a guarantee of financing. All loans through Shopify Lending, including Shopify Capital, are issued by WebBank in the United States.
