What Is remittance advice? Why Businesses Use It

Payment matching with the right invoice is a common problem. A bank transfer may show that $5,000 was sent. But it’s not always clear which invoice it is for. Is the payment for invoice #123, #125, or both? For businesses that send many invoices or get payments from overseas, this lack of detail slows reconciliation and makes cash flow harder to manage.

Remittance advice fixes that gap. This article explains what remittance advice is, what it usually contains, how businesses send it, the common problems that come up, and how invoicing tools can make the whole process easier for companies in Australia.

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What is remittance advice?

Remittance advice is a document or message sent by the payer to the payee that explains a payment. It can be a printed slip, a PDF attached to an email, or an electronic file that an accounting system reads automatically.

Long ago, remittance advice travelled with a cheque in the mail. People would detach a slip and send it with the cheque so the supplier could see what the payment was for. Today, cheques are rare. The same idea survives as an email or electronic notification.

The main point is matching. The remittance advice tells the supplier which invoices to mark as paid. That prevents guesswork and reduces the chance of mistakes.

For a business, when customers make payments without context, the accounts team has to spend extra effort figuring out which invoices are settled and which are still open. This can delay reporting, and sometimes even damage supplier–customer relationships if payments are applied incorrectly.

Example of how remittance advise works

Let's say an Australian wholesaler supplies goods to a retailer each month. In July, the wholesaler issued three invoices:

Invoice #101: $5,000, Invoice #102: $3,000 and Invoice #103: $2,000

Later, the retailer writes one check for $10,000, thus settling all three invoices at once.

In case the retailer does not deliver a remittance advice, the bank statement that the wholesaler’s accounting department will get will merely indicate one deposit amounting to $10,000. The staff will then be required to figure out which invoices this payment covers. The issue is that if they misidentify it and mistakenly mark an invoice as paid, it might result in errors in the records and even in conflicts over time.

If the retailer sends a remittance advice, it might look like this:

“The payment of $10,000 refers to Invoice #101 ($5,000), Invoice #102 ($3,000), and Invoice #103 ($2,000).”

In a nutshell, the supplier sends an invoice. The customer makes a payment and includes a remittance advice that shows which invoices the payment covers. The supplier then uses this to match the payment, mark the invoices as paid, and keep records accurate.

Purpose of a remittance advice

Remittance advice serves several purposes in business transactions:

• Simplifies payment processes – shows which invoices a payment applies to, reducing the need for extra communication.
• Supports accurate record-keeping – helps both the payer and the supplier keep their accounts correct.
• Reduces reconciliation errors – lowers the chance of payments being applied to the wrong invoices.
• Improves cash flow visibility – gives suppliers a clearer view of expected and received funds.
• Builds trust between businesses – regular, clear payment information keeps both sides aligned.

Type of information found on a remittance advice

1. Payer details – the name, company, and sometimes contact details of the person or business making the payment.
2. Payee details – the supplier’s name and contact details, so it’s clear who the payment is going to.
3. Invoice information – invoice numbers, dates, and sometimes references that connect the payment to specific invoices.
4. Payment amount – the total paid, and sometimes a breakdown showing how much goes against each invoice.
5. Payment method – whether it was a bank transfer, cheque, wire, or something else.
6. Date of payment – the date the money was sent.
7. Adjustments or deductions – any discounts, credits, or partial payments that affect the final amount.
8. Transaction reference – a bank transaction ID or other reference number that helps trace the payment.
9. Contact information – details of someone to reach out to if there’s a question or mismatch.

Ways to send a remittance advice

• Email – the most common method today, often with a PDF or short note attached for quick delivery.
• Paper slip – a traditional option sent by post, still used by some businesses, but slower and less reliable.
• Removable slip on an invoice – a detachable section that customers return with their payment to show which invoices are covered.
• Electronic formats (EDI or XML) – used by larger organisations, allowing remittance advice to be processed automatically by accounting systems.

Challenges involved with a remittance advice

Varied formats

Customers use different methods for remittance advice. Some send paper slips, others send PDFs or spreadsheets. Larger companies may use EDI or XML files. For suppliers, handling this mix can be difficult and may require extra steps to complete the transaction.

Lack of information

Sometimes remittance advice doesn't include invoice numbers or payment references. The accounts team then struggles to match payments with invoices. They may need to contact the customer to confirm, which slows down reconciliation.

Timing gaps

Payments and remittance advice do not always arrive together. The payment may appear in the bank account first, with the remittance advice following later. This delay leaves the supplier uncertain about which invoices have been paid until the advice arrives.

Manual processing

In quite a few instances, remittance advice is manually processed. The employees have to interpret the document, pick out invoice numbers, and change the records with their hands. For enterprises dealing with a large number of payments, this procedure can be very time-consuming and also allows errors to be more probable.

Wise Business: Send, track, and manage invoices in one place

Wise Business has invoicing capabilities that let companies create and send invoices directly to customers. Invoices can be issued in different currencies, and payments can go straight into the Wise account.

Businesses can quickly see which invoices are sent, paid, or pending. This helps companies with local and international clients manage payments without switching between multiple systems.

Wise Business helps streamline overseas business payments without foreign transaction fees, saving up to 3x compared to other providers.

• Free to register — Send money to 140+ currencies with no hidden exchange rate markups
• Make up to 1,000 transfers at once with the Wise batch payments feature
• Fast, low-cost payouts to customers, freelancers, employees, investors, and suppliers globally
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• Fast and fully secure payments through Wise, even for large amounts

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This general advice does not take into account your objectives, financial circumstances or needs and you should consider if it is appropriate for you.

FAQs

1. What is the purpose of a CARC code found on remittance advice forms?
One of the main terms found in healthcare remittance advice is a CARC, or Claim Adjustment Reason Code, which provides a detailed explanation of the payment made. It represents the primary reason for the change in monetary funds, for example, changes resulting from recoupments, contractual agreements, or patient accounts. Moreover, to add even more detail, CARCs may be linked with other classifications, such as Group Codes and Remittance Advice Remark Codes (RARCs). In this way, providers can understand not only which part of the claim is paid and which is deducted, but also who is responsible for the unpaid balance¹.

2. What is an 835 remittance advice?
835 remittance advice, better known as an Electronic Remittance Advice (ERA), is essentially an electronic file used to explain the payments of various claims in the healthcare industry. Insurers use it to provide healthcare providers with information about the payments made for services or procedures. They also inform providers of any charge reductions or denials and state if any co-payments or deductibles have been applied. It complies with HIPAA 5010 standards and is an integral part of the Electronic Data Interchange (EDI) system.

The 835 is the counterpart to the 837 Health Care Claim file. One 835 may incorporate several 837 submissions, while multiple 835 files can also be used to respond to just one 837. This format saves time since payments can be posted automatically into billing systems, significantly reducing manual data entry and errors².

3. What is a remittance advice report?
A remittance advice report is basically a detailed report that indicates all the remittance advice that has been given or received by a company for a specific period. The report allows the accounts teams to check the received payments, match the invoices with the paid amounts, and maintain the records well.

Sources

1. CARC code
2. 835 remittance advice