A remittance advice is a letter sent by a customer to a
supplier, to inform the supplier that their invoice has been paid. If the
customer is paying by cheque, the remittance advice often accompanies the
cheque. The advice may consist of a literal letter (e.g., "Gentlemen: Your
shipment of the 10th inst was received in good order; accompanying is our
remittance of $52.47 per invoice No 83046") or of a voucher attached to
the side or top of the cheque.
Remittance advices are not mandatory; however they are seen
as a courtesy because they help the accounts-receivable department to match invoices
with payments. The remittance advice should therefore specify the invoice
number for which payment is tendered.
In countries where cheques are still used, most companies'
invoices are designed so that customers return a portion of the invoice, called
a remittance advice, with their payment. In countries where wire transfer is
the predominant payment method, invoices are commonly accompanied by standardized
bank transfer order forms (like acceptgiros (Netherlands) and Überweisungen
(German)) which include a field into which the invoice or client number can be
encoded, usually in a computer-readable way. The payer fills in his account
details and hands the form to a clerk at, or mails it to, his bank, which will
then transfer the money.
The employee who opens the incoming mail should initially
compare the amount of cash received with the amount shown on the remittance
advice. If the customer does not return a remittance advice, an employee
prepares one. Like the cash register tape, the remittance advice serves as a
record of cash initially received.
Modern systems will often scan a paper remittance advice
into a computer system where data entry will be performed. Modern remittance
advices can include dozens, or hundreds of invoice numbers, and other
information.
RAs can be very complicated, especially in specialized
fields like medical insurance payments. For example, there is a 188 page
document entitled Understanding the Remittance Advice for the Medicare health
insurance program