Often you might have heard your accounts team mention the term remittance advice. Derived from the word ‘remit,’ which means to pay back — a remittance is an online or offline document sent to confirm a payment transaction. Businesses working with multiple customers seek transparency with invoicing as it offers financial clarity. Remittance advice makes this process convenient because you’ll know when you’ll receive your payment and against which orders.
Remittances allow suppliers to match their open invoices with incoming payments seamlessly. If a customer doesn’t generate remittance, the suppliers can request one to avoid applying payment on-account. In this blog, we will discuss remittance and why it’s essential for a business.
A remittance is a document that signifies the reason why a customer made a particular payment. While the usage of remittance originated when checks were widely in practice, it’s still in use because several global businesses still transact via checks. Customers send in their remittance advice along with the payment so that the suppliers can maintain a record. Even though digital payments are prevalent now, remittances help organize and match open invoices with payments, which is largely helpful if you’re dealing with multiple payments from your customers every day.
Also known as customer remittance, remittance advice generally contains the invoice number, line-item level information and their corresponding payment information. Cash application teams have to handle remittances manually which can turn out to be cumbersome. Read this article to learn the best practices of remittance processing.
Apart from these, there are various remittance formats prevalent across the industry; you can get a glimpse of the 13 most commonly-used remittance formats here.
While remittance isn’t mandatory for a business, here are some reasons why you should consider it:
A remittance slip is ideally declared on a document with company letterhead. It should include the contact details of the POC along with the following information:
If the remittance is sent by email, your accounts team can monitor the payment or communicate with the POC in case of discrepancies.
Let us consider a buyer-supplier ecosystem where the buyer is PentaCorp, and the supplier is ABCCorp. As PentaCorp releases the payment corresponding to the goods supplied by ABCCorp, they also send a remittance advice that indicates the order number, invoice number, payment amount, line-item level details.
The following image shows what a cheque remittance looks like:
Customers send remittances through various modes. They could send it along with the check or via emails, EDIs or as web remittances. When sending it via email, ensure you deliver it to the correct department. We would recommend confirming the email credentials with the cash application team before sending it in to avoid miscommunication. If you’re sending the remittance advice along with the check, it means you’re also clearing the invoice simultaneously. Maintain a copy of the remittance advice for your recordkeeping too.
The cash application teams have to handle multiple remittance formats and sometimes even missing remittance scenarios. Manually processing remittances from emails, EDIs, paper-based documents or even web portals can turn out to be difficult and error-prone. Learn how the cash application team at Wesco simplified their remittance processing by automating the cash application process.
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HighRadius Cash Application Software enables the end-to-end automation of the cash application process that covers major benefits such as AI-enabled data capture for remittances, auto-linking of payments with open invoices, cost-cutting on lockbox fees and easy compatibility with any system due to its ERP-agnostic Saas infrastructure. Apart from the major benefits that it has, there are some key features which can not be missed out, some of them are Email Remittance capture, Discounts and Deductions Handling, Check Remittance Capture, Web Remittance Capture, Invoice Matching, and RDC & Mobile Payments.