Remittance Advice and its need
What is a Remittance Advice?
Remittance advice is a document or notes to suppliers sent from customers to their sellers informing them about the payment of their invoice. Remittance advices generally contain information such as invoice amount, invoice number, method of payment, and text notes. Please note that remittance advice is not mandatory; they are optional but nevertheless sent as a mark of courtesy to sellers as it helps them match invoices with payments. As remittance advice is optional, it can be sent in a number of ways. If the payment is done via cheque, then the remittance advice could be sent along with it. Remittance advices work as a proof of payment received and is thus equivalent to a receipt from a cash register. Also, some firm include remittance slip with the invoice which the customer can send back to the seller along with the payment. In this age of internet, online payment is becoming increasingly popular which has to a considerable extent reduced the role or importance of remittance advice. However, in case of online payment also you could send a reminder through e-mail informing the seller about the payment.
When a Remittance Advice need to be issued?
Whenever you have made a payment to a seller or a supplier, it is important that you send them the remittance advice which shows the payment you have made against the invoice. This helps the seller match invoices with payments. It serves as a useful record for both suppliers and buyers as it saves a lot of time as far as matching payment with the invoice is concerned.
Information that you need to put on Remittance Advice
You should take care to put the following information on the remittance note.
Amount you have paid against each invoice
Also, you need to include all the above mentioned things for any credit note included in the payment. Moreover, you need to mention along with amount the date on which it was paid or is likely to be paid. It is also advisable to print remittance advice on company letterhead that contains the number of the person to be contacted in case of any queries or questions. Also, an important point to note in case you are in the construction industry is that you may be required to deduct CIS tax from payments to some suppliers. The best way forward is to speak to a qualified accountant in case you are unsure about whether this tax is applicable to you or not. Also, if CIS is applicable you must take care to show it in your invoice.
Ways and means of issuing a Remittance Advice
This is a common query as people are generally unsure about how can they go about the business of issuing a remittance advice. Some of the ways in which remittance advice could be issued are as following:
In case you are making payment through cheque, it is best to send remittance advice with the cheque.
Everything these days is moving online and remittance advice is no exception. Most of the payments are made online and as such remittance advices are usually sent by email.
Is it advisable to keep copies of Remittance Advice?
It certainly is. It is important that you carefully keep record of all the remittance advices that you have sent to your suppliers as well as those that you receive from your customers. It is always a good practise to keep them in an orderly manner so that you can easily refer to them in case there is a query with the remittance advice in the future. Also, your accountant may want to have a look at them during preparation of your end-to-end accounts to ensure there is no disparity between payment and invoices.