What Is Remittance Advice And Why It Matters For UK Business
Let’s unpack what remittance advice really means, how it works, and how you can make it part of your accounting system.
September 17, 2025
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Paying suppliers is one thing, but ensuring they know exactly what you paid for is a whole thing unto itself. Suppliers' primary objective is to supply via their factory or warehouse, not run an Ernst and Young-style accounting practice that keeps immaculate track of every invoice. This is where remittance advice comes in: a paper trail of accurate documentation to keep operations running smoothly and business lean.
What is remittance advice, and how does it work in accounting?
Remittance advice is a document that a buyer sends to a supplier to confirm that payment has been made and why it was made. For example, if a hair dryer factory in the UK buys 12,000 components from a factory located in Guizhou, China, this document would stipulate the quantity, price, and terms. It's an important note that explains which invoice or invoices the payment is meant to cover. This document helps the supplier match the incoming payment with the correct transaction on their end, especially if payments are received in bulk or don’t align with invoice numbers exactly.
In accounting, remittance advice is part of the accounts payable process, which means that as soon as the remittance advice is issued, it moves into the accounts payable ledger, which is used to assess the cash flow and ultimately the value of a company. When a business pays a vendor, it sends remittance advice separately or along with the payment to clarify the details: which invoices are being paid, how much was paid, and whether there were any deductions (such as credit notes or early payment discounts). It can be in the form of a physical slip, a PDF attached to an email, or an electronic message through payment processing software or bank portals.
What is the purpose of a remittance advice in B2B transactions?
The purpose of remittance advice is pretty simple: CLARITY
When businesses send and receive dozens or even hundreds of payments per month, the margin for error, whether human or mechanical, grows. Just receiving a random payment into an account with nothing else often leads to these types of questions.
- What invoice is this payment for?
- Is this a full or partial payment?
- Did the buyer deduct any credits?
In a worst-case scenario, you can get a knock on your door by MI6 agents asking you why this seemingly dodgy money keeps coming into your account from a little-known bank in Nicaragua. Without proper remittance advice, these questions can grow. Remittance advice helps answer these questions up front and eliminates ambiguity by confirming exactly what’s being paid and why. This makes it easier for suppliers to reconcile accounts, follow up on unpaid balances, and manage their cash flow with greater accuracy.
What details are included on a remittance advice slip or note?
The format of a remittance advice note can vary depending on your accounting software, bank, or payment platform. However, the most effective remittance advice slips include these essential components:
- Payer details: The business name, address, and contact information of the payer
- Payee (supplier) details: The supplier’s name and account information
- Payment amount: Total amount paid, including VAT if applicable
- Payment method: How the payment was made (BACS, CHAPS, cheque, etc.)
- Payment date: The date the payment was initiated or completed
- Invoice references: All relevant invoice numbers are included in the payment
- Breakdown of amounts: A list of amounts paid per invoice, including any deductions or credits
The goal is to ensure the supplier can quickly and confidently reconcile the payment with their outstanding invoices. The more comprehensive and consistent the remittance advice, the fewer follow-up emails or payment disputes you'll encounter.
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How does remittance advice help businesses manage payments?
For businesses on both sides of a transaction, remittance advice acts like a cross-check between bank records and invoices.
It helps accounts teams:
- Match payments to specific invoices faster
- Spot underpayments or overpayments more easily
- Keep audit trails cleaner for financial reporting
- Manage credit terms and early payment discounts
- Resolve queries with suppliers more efficiently
Let’s say you’re paying five outstanding invoices from the same supplier in a single bank transfer. Without remittance advice, your supplier might receive a lump sum and have no idea which invoices it applies to or possibly who even sent it. He could have paid you back for those pints you bought him last year, and it's messing up your Excel spreadsheet values. That slows down their internal reconciliation and could result in unnecessary follow-up.
By sending remittance advice alongside the payment, or even a day before, you reduce that friction. Over time, this can create smoother relationships across he board.
The risks of not using remittance advice in your business
Remittance advice isn't legally required by the government or anything, but skipping it can cause a mountain of trouble. When suppliers don’t know what a payment is for, they’re left guessing, and in business, guessing comes with substantial risks. This can lead to risks like misallocated funds, delayed reconciliations, and extra back-and-forth just to get clarity. For buyers, it adds friction to supplier relationships and can mess with credit terms or timelines.
Without remittance details, payments can land in the wrong spot or get split incorrectly. Remittances meant for one entity can end up in Equatorial Guinea with another entity. It also opens the door to paying invoices twice or missing them altogether. Suppliers might even stop a shipment or raise a dispute if they think a payment is missing. On the back end, it also weakens accounting controls, making it harder to spot errors or pass an audit.
Understanding BACS remittance advice and other payment types
BACS (Bankers' Automated Clearing Services) is one of the most common payment methods for UK businesses. It's cost-effective and widely accepted for processing direct bank transfers, including payroll, supplier payments, and bulk disbursements. However, BACS doesn't automatically include invoice-level information; this is where remittance advice fills the gap.
When you process a BACS payment, your supplier will typically receive a lump sum in their bank account with minimal reference details. Without remittance advice sent separately (via email or text, for example), they may not know which invoice it applies to.
Other payment types also benefit from remittance advice:
Comparative example: Payment methods and reconciliation outcomes
Let’s consider a company paying £10,000 to a supplier using three different payment methods. We’ll compare how clear the remittance data is, how quickly it’s reconciled, and how often follow-up is required.
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How remittance advice connects to trade credit and cash flow forecasting
Remittance advice plays an indirect but important role in managing trade credit and forecasting cash flow. For businesses that extend or rely on credit terms, such as net 30 or net 60 days, timing and clarity around payments are everything.
Here's how remittance advice supports credit and forecasting
Clarifies the use of credit notes
Remittance advice makes it clear when a credit note or discount is being applied to an invoice, so the supplier knows exactly why a payment might be less than expected. For example, if an invoice totals £2,000 and you’re applying a £300 credit note, the remittance slip should show that only £1,700 was paid, and why. It saves both sides from chasing down the difference later.
Feeds forecasting tools
Accurate remittance advice gives finance teams clean data to plug into cash flow and forecasting tools. It shows when payments are made, how they’re applied, and what patterns are forming. For example, if your accounting system shows a series of paid invoices backed by remittance records, it helps build a reliable forecast for Q4 outflows, keeping your working capital models on track.
Forecasting example: Impact on cash flow visibility
Now let’s show how different remittance practices can affect a business’s ability to forecast cash flow. The example below is illustrative, based on typical reconciliation workflows and internal finance benchmarks, to help visualise how varying payment methods influence operational efficiency.
How to automate remittance advice in your accounting systems
While sending a remittance note manually works for low-volume businesses, most growing firms eventually automate the process. And with all the options available these days, why wouldn't you? Today’s cloud-based accounting platforms, ERP systems, and banking integrations allow you to generate and deliver remittance advice seamlessly, saving time and reducing human error.
Automation options include:
Accounting software: Platforms like Xero, QuickBooks, and Sage allow you to send remittance advice directly from the dashboard once a payment is marked as sent.
- Bank integrations: Many banks offer remittance templates as part of their BACS or CHAPS payment portals.
- Custom ERP flows: For larger businesses, ERP platforms like NetSuite or SAP can generate remittance notes automatically when a payment is approved or batched.
- Email automation: Some tools allow you to attach a PDF remittance advice to an email triggered by the payment date.
Here’s a simplified breakdown of common automation options:
Cost impact: Time spent on reconciliation by payment type
If we estimate that a finance team spends time resolving unclear payments, here’s a realistic breakdown for 50 payments per month:
Final thoughts: Small detail, big impact
Imagine throwing a birthday party for someone, everyone contributes a differnet amount to the birthday present, but you have no notes on who contributed what, and the money is lying in a pile of mixed-up cash on the floor. You have no idea who gave what and how much. In B2B finance, life without remittance advice can seem like a random pile of cash on the floor with no one to attribute it to. This is where remittance advice saves the day, clarifying what was paid for as well as how, where, and why. Remittance advice may seem like an optional extra, but in practice, it’s a powerful tool for clarity, control, and consistency.
Article Sources
- GOV.UK – RPA Remittance Advice Guidance
- West Sussex County Council – Payments for Goods and Services
- University of Cambridge – Payment Methods Policy
- GOV.UK – Payment processing and accounting: payment methods: Bacs Direct Credit
