A remittance advice is a note sent by a customer to a supplier to say that a payment has been made and which invoices it covers. It typically shows the payment date, the amount, the payment reference that will appear on the bank statement, and a breakdown by invoice number, including any deductions or credit notes. It is not an invoice and not a receipt: its job is to let the supplier match the money to the right invoices quickly and spot any shortfall.
What a remittance advice is for
When a customer pays several invoices in one bank transfer, the supplier sees a single lump sum on its bank statement. Without a breakdown, the credit control team has to guess which invoices have been settled, and an unexplained shortfall can sit unresolved for months. The remittance advice closes that gap. It tells the supplier:
- That payment has been sent. Useful when a bank transfer takes time to clear or when the customer pays on a weekly or monthly payment run;
- What the payment is for. Invoice numbers and the amount paid against each;
- What has been deducted. Credit notes applied, disputed items held back, or early settlement discounts taken.
For the supplier, it is the document that allows cash to be allocated correctly in the sales ledger, which keeps the trade debtors figure honest and stops customers being chased for invoices they have already paid.
What a remittance advice usually contains
There is no prescribed format. A practical template, which suits a PDF attached to an email or a slip printed from accounting software, looks like this:
| Field | Example |
|---|---|
| Payer name and address | Customer's legal name |
| Payee (supplier) name | Supplier's legal name and supplier account code |
| Payment date | Date the payment was made |
| Payment method and reference | Bank transfer, with the reference shown on the bank statement |
| Invoice lines | Invoice number, invoice date, invoice amount, amount paid |
| Deductions | Credit note numbers, disputed amounts, discounts |
| Total paid | The sum that should match the bank receipt |
| Contact | Who to call with a query |
Government bodies use the same approach. The Rural Payments Agency, for example, sends remittance advice slips that show the BACS payment reference that will appear on the bank statement, the scheme, the agreement or claim number, the transaction date and the amount, and it notes that the payment is likely to reach the bank account 2 working days after the transaction date.
Remittance advice, invoice and receipt compared
- Invoice. Issued by the supplier to request payment. Where both businesses are VAT registered, a VAT invoice is required, and every invoice must include specific details such as a unique number, the supply date and the amount owed;
- Receipt. Issued by the supplier to acknowledge payment. HMRC's guidance describes a receipt as "an acknowledgement of payment";
- Remittance advice. Issued by the customer to explain a payment. It is a matter of commercial practice rather than one of the documents gov.uk lists as required on invoicing, so it does not replace either the invoice or the receipt.
The exception is self-billing. Under a self-billing arrangement, which requires both parties to be VAT registered and to have a self-billing agreement, "the customer prepares the supplier's invoice and forwards a copy to the supplier with the payment". In practice the self-billed invoice and the remittance advice are often one document, so it must meet the VAT invoice requirements as well as explain the payment.
Short payments and late payments
A remittance advice is often the first sign that a customer is not paying in full. If the total paid is less than the invoices listed, the deductions column should say why. If it does not, query it straight away: unexplained short payments are much harder to recover months later.
If the payment arrives after the due date, the supplier may be entitled to statutory interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998. Interest runs at 8% above the Bank of England reference rate, and the fixed sum per debt is £40 for debts under £1,000, £70 for £1,000 to £9,999.99, and £100 for £10,000 or more. The remittance advice, with its payment date, is useful evidence of when payment was actually made.
Fraud risk: fake remittance advices
Because a remittance advice is a routine, expected email, it is an easy disguise for phishing. A fake one looks as if it comes from a customer, announces a payment, and asks the recipient to open an attachment or "log in" to view the details. Practical controls:
- Check the bank, not the email. A remittance advice is not proof of payment; only the bank statement is;
- Treat links with suspicion. A genuine advice is normally a simple attachment or a portal you already use;
- Verify bank detail changes by phone. Use a number you already hold, never one from the email, before changing any supplier's bank details in your own purchase ledger.
A word of caution on terminology: "remittance" also has a separate tax meaning for people with foreign income, covered in our guide to remittance after the remittance basis. The two are unrelated.
Primary sources: HMRC guidance on invoicing and taking payment, VAT self-billing arrangements, the Rural Payments Agency's remittance advice guidance, and the Late Payment of Commercial Debts (Interest) Act 1998, s5A. Our purchase ledger guide covers the paying side of the process.
If matching receipts to invoices is taking too much time, our bookkeeping services team can take over cash allocation and debtor reporting, and our accounts payable outsourcing service sends clear remittance advices with every payment run.