What Is a Remittance Advice? A Complete Guide for AP Teams

A remittance advice is a document a payer sends to a payee that identifies exactly which invoices a payment covers. It lists invoice numbers, individual amounts paid, and any deductions or adjustments applied to each line item. For accounts payable teams, this document is the primary tool for matching incoming payments against open invoices and keeping the AR or AP ledger accurate and current.

This guide is written entirely from the perspective of the AP department, accountant, or business owner on the receiving end of a remittance advice. Most resources on this topic focus on the sender or treat both sides interchangeably. Here, every recommendation, example, and workflow assumes you are the payee processing an incoming payment notification, not the one issuing it.

The sections ahead cover what you need to work with remittance advice documents effectively: a field-by-field breakdown of the data a remittance advice contains, the different formats you will encounter (basic, removable, turnaround, and electronic/EDI 820), how a remittance advice compares to related but distinct documents like payment advice slips, bank statements, and receipts, a worked reconciliation example that walks through partial payments and deductions, common problems AP teams run into when processing these documents, and a verification checklist you can apply before posting any payment.

First, a closer look at the specific data fields that appear on a remittance advice and what each one tells you during reconciliation.

What a Remittance Advice Contains: A Field-by-Field Breakdown

A remittance advice is only useful if you know how to read it. Each field serves a specific purpose in your reconciliation workflow, and missing or mismatched data in any one of them can stall the entire process. Here is what a standard remittance advice shows and what each field means for your AP team.

Payer Name and Address

This identifies who sent the payment. Your first step is matching it against your customer or vendor master file. If the payer name does not match any active account, you may be dealing with a subsidiary, a parent company paying on behalf of a child entity, or a payment from a factoring company. Flag these immediately rather than assuming a match.

Payee Name and Address

Confirms the payment was intended for your organization. Verify the payee details match your company's legal name and address on file. This field rarely causes reconciliation failures, but catching a misdirected payment or outdated payer record early prevents downstream audit trail issues.

Payment Date

The payment date records when the payer initiated the transaction, not when the funds arrived in your account. Compare this against the deposit date on your bank statement to identify timing gaps. A three-to-five-day lag is normal for ACH transfers. Longer gaps may indicate processing delays, held payments, or errors that need follow-up with the payer's AP department.

Payment Method and Reference Number

This field includes the ACH reference, check number, or wire transfer ID. It is your primary key for matching the remittance advice to the actual bank deposit. Without a reliable reference number, you are left matching on amount alone, which becomes unreliable when multiple payments from the same customer arrive on the same day or when amounts are close together. Record this reference number in your ERP or accounting system against the corresponding bank transaction.

Invoice Numbers

The invoice numbers listed on the remittance advice tell you exactly which open items the payer intends to cover. Match each listed invoice number against your open AR ledger. If an invoice number does not exist in your system, it may reference a purchase order number, a payer-assigned internal reference, or a data entry error on the payer's side. Document unmatched invoice numbers and raise them with the payer before closing the payment.

Invoice Dates and Amounts

These fields show the original invoice amounts as recorded in the payer's system. Compare them line by line against your own records. Discrepancies often surface here: a payer may have recorded a different amount due to pricing disputes, quantity disagreements, or data entry mistakes. When the payer's listed amount differs from yours, do not simply accept the payer's figure. Investigate the root cause before applying the payment.

Deductions and Adjustments

This is where most reconciliation work happens. Deductions and adjustments explain why the payment total differs from the sum of the listed invoice amounts. Common entries include:

Prompt payment discounts taken for early payment (for example, 2% off if paid within 10 days)
Credit notes or returns offset against outstanding invoices
Disputed amounts withheld pending resolution
Partial payment allocations where the payer chose to pay only a portion of an invoice

Without this field, your AP team cannot explain the gap between what was invoiced and what was deposited. When deductions appear, verify each one against your records. Was the discount taken within the agreed terms? Was the credit note actually issued? Is the disputed amount already under review? Each deduction needs a clear audit trail.

Net Payment Amount

The net payment amount is the total actually paid after all deductions and adjustments. This figure must match the bank deposit amount. If it does not, start with the deductions and adjustments section to identify the source of the difference. A mismatch between the net payment amount on the remittance advice and the bank deposit often points to bank fees deducted in transit (common with international wire transfers) or a partial payment that was further reduced before settlement.

Why Field Completeness Matters

Not every remittance advice includes all of these fields. The format and completeness vary significantly depending on how the remittance advice is generated and delivered. Some arrive as structured EDI files with every field populated. Others arrive as a single line of text in a bank transfer memo with nothing more than an invoice number.

Types of Remittance Advice

Not all remittance advice documents look the same. The format you receive depends on how the payer sends their payment and how their accounting system generates supporting documentation. Four main types exist, each with distinct implications for how your AP team processes and reconciles them.

Type	Format	How It Arrives	AP Handling Notes
Basic	Standalone document (paper or PDF)	Mail, email, or fax	Must be manually matched to the corresponding bank deposit. No physical link between the payment and the remittance detail.
Removable	Tear-off stub attached to a check	Arrives with the check	Payment and remittance detail are physically paired. Detach the stub, then file or key the data into your system.
Turnaround	Pre-printed form you send to the payer	Returned by the payer with their payment	You control the format and the invoice list. The payer marks which invoices they are paying and returns the stub. Reduces data entry errors on receipt.
Electronic (EDI 820)	Structured data file (ANSI X12 820 transaction set)	Transmitted electronically, typically alongside an ACH payment	Can be imported directly into your accounting or ERP system with no manual data entry. Maps to the same fields covered in the previous section.

Basic remittance advice is the most generic form. The payer creates a separate document listing the invoices covered by a payment. Because the document travels independently from the funds, your AP team has to locate the matching bank deposit before reconciliation can begin. This adds a manual step and increases the risk of mismatches when multiple payments arrive on the same day.

Removable remittance advice eliminates that gap by attaching the detail directly to the check as a perforated stub. When the check arrives, the payment and the allocation data are already paired. This type remains common in industries where check payments are still standard. The AP workflow is straightforward: detach the stub, deposit the check, and record the details.

Turnaround remittance advice flips the process. Instead of waiting for the payer to describe what they are paying, you send them a pre-printed form listing the invoices due. The payer indicates which invoices they are covering, tears off the return portion, and sends it back with payment. This approach gives your AP team control over the document format, which reduces keying errors and speeds up matching. It is less common today but still appears in utilities and healthcare billing cycles.

Electronic remittance advice represents the most efficient option for AP teams. The EDI 820 transaction set (defined under the ANSI X12 standard) transmits payment allocation data as structured, machine-readable records. These typically accompany ACH payments in CCD+ or CTX format, and the 820's RMR (Remittance at Invoice Level) segments map directly to the invoice number, amount, and adjustment fields described in the previous section. The payer's ERP system generates the 820 as part of the payment run, so the data arrives structured and ready for import. In the UK, BACS payments serve a similar function. Because the data is machine-readable, reconciliation shifts from manual line-by-line matching to automated import with exception-based review.

Note: in healthcare, "electronic remittance advice" typically refers to the HIPAA 835 transaction set (also called an ERA), which carries claim-level payment detail from insurers to providers. This guide covers the EDI 820 used in general B2B commerce.

The trajectory is clear: B2B payments are moving away from paper and toward electronic methods. Nacha reports that B2B payment volume on the ACH Network grew 155% between 2015 and 2024, rising from 2.9 billion payments to 7.4 billion, while the value of those payments climbed 105% from $28.3 trillion to $58.2 trillion. As this shift accelerates, AP teams receive electronic remittance data far more frequently than paper documents. The reconciliation workflow changes accordingly, moving from manual matching of standalone documents to system-level import and exception handling for the records that do not align automatically.

Regardless of which type your team receives, the next question is how remittance advice compares to the other documents that cross your desk during reconciliation.

Remittance Advice vs Payment Advice, Bank Statement, and Receipt

Remittance advice is frequently confused with payment advice, bank statements, vendor statements, and payment receipts. While these documents overlap in the broader payment lifecycle, each one answers a different question during reconciliation. Knowing which document to reach for, and when, prevents wasted time and misapplied payments.

Document	Who Creates It	What It Tells You	When You Need It
Remittance advice	The payer	Which invoices a specific payment covers and what deductions (discounts, credits, disputes) were applied	When matching an incoming payment to open invoices
Payment advice	The payer's bank or payment platform	A payment was initiated or sent, including the amount and date, but typically without invoice-level detail	When verifying a payment was sent, not for invoice-level reconciliation
Bank statement	Your bank	All deposits and withdrawals over a period, showing what actually arrived in your account	When verifying that the remittance advice amount matches the actual deposit
Vendor statement	The vendor or supplier	All invoices, payments, and credits over a period, with a running balance for that vendor	For periodic vendor reconciliation, not for matching individual payments
Payment receipt	The payer or payment processor	Confirmation that the payment was received and the transaction completed	As proof of payment, not for reconciliation

For a deeper look at how vendor statements fit into your AP workflow, see this guide on understanding vendor statements in accounts payable.

The practical distinction worth underscoring: a remittance advice is the only document in this list that tells you exactly which invoices a payment is meant to cover. Your bank statement confirms the deposit arrived, but when a customer sends a single payment covering six invoices with two early-payment discounts and a credit memo offset, the bank statement shows one lump sum. Without the remittance advice, you cannot break that deposit into its component invoices. If you want to understand the fields on a bank statement and how to interpret deposit entries, see this overview of what a bank statement shows and how to read one.

The following section walks through a real reconciliation scenario, matching a remittance advice against your open invoices line by line.

How to Reconcile a Remittance Advice Against Open Invoices

The best way to understand remittance advice reconciliation is to work through a real scenario with actual numbers. Below is a step-by-step walkthrough covering three common situations: a straightforward full payment, a prompt payment discount, and a credit note offset.

The Setup

Your open invoices (accounts receivable ledger):

Invoice	Amount
INV-4401	$3,200.00
INV-4455	$1,750.00
INV-4472	$2,100.00
Total open	$7,050.00

Remittance advice received from the payer:

Invoice	Gross Amount	Adjustments	Net Paid
INV-4401	$3,200.00	None	$3,200.00
INV-4455	$1,750.00	2% prompt payment discount ($35.00)	$1,715.00
INV-4472	$2,100.00	Credit note CN-0088 ($400.00)	$1,700.00
Net payment			$6,615.00

Bank deposit received: $6,615.00

Step-by-Step Reconciliation

Step 1: Match the remittance total to the bank deposit.

The remittance advice states a net payment of $6,615.00. Your bank shows an incoming deposit of $6,615.00. These figures match, confirming the full remitted amount arrived. If they did not match, you would investigate before proceeding.

Step 2: Match each invoice number to your open ledger.

Cross-reference INV-4401, INV-4455, and INV-4472 against your accounts receivable. All three invoices appear in your system as open and unpaid. If any reference were missing or already closed, that would flag an immediate discrepancy.

Step 3: Reconcile INV-4401 (full payment).

The remittance advice shows $3,200.00 paid against INV-4401. Your ledger shows INV-4401 outstanding at $3,200.00. The amounts match exactly. Mark INV-4401 as fully paid and close the line item.

Step 4: Reconcile INV-4455 (prompt payment discount).

The remittance advice shows $1,715.00 paid against INV-4455, but your ledger shows the invoice at $1,750.00. The $35.00 difference represents a 2% prompt payment discount.

Before accepting this, verify two things:

The original payment terms included a prompt payment discount (e.g., "2/10 net 30")
The payment was received within the discount window

If both conditions are met, the discount is valid. Close INV-4455 by recording $1,715.00 as the cash receipt and $35.00 as a sales discount. If the payment arrived outside the discount period, the $35.00 becomes a short payment that requires follow-up.

Step 5: Reconcile INV-4472 (credit note offset).

The remittance advice shows $1,700.00 paid against INV-4472, but your ledger shows $2,100.00 outstanding. The $400.00 difference is attributed to credit note CN-0088.

Verify that credit note CN-0088 exists in your system and that its value is $400.00. Confirm it has not already been applied to another invoice. For a deeper explanation of how credit notes and invoices interact, including how credit memos reduce outstanding balances, that linked guide covers the mechanics in detail.

If the credit note checks out, close INV-4472 by applying the $400.00 credit offset and recording the $1,700.00 cash receipt. The invoice balance reaches zero.

Step 6: Confirm all invoices are resolved and update the ledger.

After processing all three line items:

Invoice	Original	Cash Received	Discount	Credit Applied	Remaining
INV-4401	$3,200.00	$3,200.00	$0.00	$0.00	$0.00
INV-4455	$1,750.00	$1,715.00	$35.00	$0.00	$0.00
INV-4472	$2,100.00	$1,700.00	$0.00	$400.00	$0.00

All three invoices are fully resolved. The $6,615.00 bank deposit is fully allocated. Update your ledger to reflect the closed status of each invoice, and file the remittance advice as supporting documentation for the payment.

When the Numbers Do Not Match

This scenario represents a clean reconciliation where every line item resolves without dispute. In practice, discrepancies are common: invoice numbers that do not match your records, discount amounts that were not agreed upon, or credit notes you cannot locate. The next section covers the most frequent problems AP teams encounter and how to address them.

For teams managing high volumes of vendor relationships, the same matching principles apply at scale when reconciling vendor statements against your records. The core workflow remains identical: compare what the counterparty reports against what your ledger shows, and investigate every difference.

Common Problems When Processing Remittance Advice

Even well-run AP departments encounter recurring friction when processing remittance advice documents. The problems below account for the majority of reconciliation exceptions, delayed cash allocation, and payer disputes. For each, here is what happens, why it happens, and what your team should do.

1. Missing or Unrecognizable Invoice References

What happens: The remittance advice lists a payment amount but omits invoice numbers entirely, or references the payer's internal purchase order numbers, goods receipt numbers, or other identifiers that do not match anything in your accounts receivable system.

Why it happens: Many payers generate remittance advice directly from their own AP system, which defaults to their internal reference scheme rather than your invoice numbers. Smaller payers using manual processes often skip invoice-level detail altogether, listing only a lump sum and a vague description like "October services."

What to do: Contact the payer's AP department with the payment reference number (from the remittance or bank transaction) and request invoice-level detail. If this is a repeat issue with the same payer, provide them with a remittance template that includes a mandatory field for your invoice numbers. Document the mapping between their reference numbers and yours so future remittances from that payer can be cross-referenced without delay.

2. Amount Mismatch Between Remittance and Bank Deposit

What happens: The remittance advice states a payment of $6,615, but the bank deposit shows $6,600. The figures are close but do not match, and the AP team cannot confirm whether the payment was made in full.

Why it happens: Three common causes drive this discrepancy. First, intermediary or correspondent bank fees may be deducted from wire transfers before the funds reach your account, particularly on international payments. Second, currency conversion differences arise when the payer sends in one currency and your bank converts at a slightly different rate than the one the payer used. Third, the payer may have sent a different amount than stated on the remittance due to a last-minute adjustment, rounding, or error on their side.

What to do: Start by checking the payment method's fee structure. Wire transfers, especially cross-border SWIFT payments, frequently incur intermediary bank charges. Review your bank's transaction detail for any noted fees or FX conversion rates. If the discrepancy aligns with a known fee or conversion spread, document it and allocate accordingly. If the difference remains unexplained after accounting for fees and FX, contact the payer with the specific figures from both the remittance and your bank statement and ask them to confirm the amount they actually released.

3. Bundled Payments Without Line-Level Detail

What happens: A single payment covers dozens of invoices, but the accompanying remittance advice is a one-line summary showing only the total amount paid. The AP team has no way to allocate the payment across individual open invoices in the subledger.

Why it happens: Large payers often consolidate their payment runs, issuing one check or one wire transfer for an entire batch of invoices due that week. Their system may generate a detailed internal remittance but only send a summary version to the payee, especially when the remittance is auto-generated from an ERP payment run with default output settings.

What to do: Request itemized remittance data from the payer. Be specific: ask for a breakdown that lists each invoice number, the original invoice amount, any deductions taken, and the net amount applied per invoice. For payers that send payments via EDI, ask whether an EDI 820 payment order/remittance advice transaction accompanies the payment. The 820 addendum carries the line-level detail that a summary remittance lacks. If the payer cannot provide detail promptly, hold the payment as unapplied cash and set a follow-up deadline to prevent the balance from aging indefinitely.

4. Unapproved or Unexplained Deductions

What happens: The remittance shows a gross payment of $12,000 against three invoices totaling $12,400, with $400 deducted. The deduction is labeled vaguely ("discount," "return," or "adjustment") or not labeled at all, and it does not match any approved credit note, early payment discount, or return authorization in your records.

Why it happens: Payers take deductions for a variety of reasons: early payment discounts they believe they qualify for (even if the discount window has passed), disputed line items, volume rebates, returns they processed on their end but never communicated, or pricing disagreements. Some payers deduct first and explain later, treating the remittance as a unilateral settlement.

What to do: Compare each deduction line on the remittance against your credit note register, payment terms (including discount eligibility windows), and any open dispute or return records. If a deduction matches an approved credit note or a valid early payment discount, apply it. If it does not, flag it immediately. Send the payer a formal short-pay dispute notice that identifies the specific deduction, the invoice it was taken against, and a request for documentation justifying the deduction. Track unresolved deductions in a deduction management log with aging dates so they do not quietly expire past your dispute window.

5. Late or Missing Remittance Advice

A bank deposit appears in your account, but no remittance advice arrives by email, EDI, or mail. The payer may have forgotten to send it, failed to auto-generate it, or routed it to the wrong email address. Some payers simply do not send remittance advice unless explicitly asked.

Contact the payer's AP department within one to two business days of receiving the unidentified deposit. Reference the deposit amount, date, and any bank transaction identifiers you have. While waiting for a response, record the payment as unallocated cash on the ledger rather than guessing at the allocation. Set a firm follow-up deadline (typically five business days). If the payer is a repeat offender, escalate to your relationship manager and request that remittance advice be included as a standard part of their payment process.

6. Duplicate Remittance Advice

The same remittance arrives through multiple channels: once by email, once through an EDI feed, and once by postal mail. This happens most often during system migrations (when a payer transitions from paper to electronic remittance and both channels run simultaneously) or after manual resends when a payer's clerk is unsure whether the first copy went through. If the AP team processes each copy independently, the same payment gets posted two or three times in the subledger, overstating cash receipts and understating receivables. Use the payment reference number as a deduplication key: before posting, check whether a remittance with the same reference number, payment date, and amount has already been recorded. Flag and discard duplicates before they reach the posting stage.

Most of these problems share a root cause: insufficient detail on the remittance advice itself. When payers omit invoice references, send summary-only documents, or skip the remittance entirely, every downstream reconciliation step becomes harder. AP teams that establish clear remittance requirements with their payers, specifying the format, the required fields (invoice numbers, deduction reasons, payment references), and the delivery method, reduce these exceptions significantly. The next section provides a practical checklist for doing exactly that.

Remittance Advice Verification Checklist for AP Teams

Apply this checklist every time a remittance advice arrives. Working through each step in order prevents misapplied payments, unresolved deductions, and audit gaps.

Confirm the payment reference matches a bank deposit. Locate the payment reference number on the remittance advice and verify it corresponds to an actual deposit on your bank statement. If no deposit exists yet, hold the remittance until the funds clear.
Verify every invoice number against your open ledger. Each invoice listed on the remittance should appear in your accounts receivable or accounts payable ledger as an open item. Flag any invoice numbers that do not match your records, as they may indicate data entry errors by the payer, duplicate payments, or invoices already closed.
Compare each invoice amount to your recorded amount. Check that the dollar amount listed for each invoice on the remittance matches what your ledger shows. Discrepancies often stem from pricing disputes, unapproved deductions, or currency rounding differences.
Review all deductions and adjustments. For every deduction the payer has taken, confirm it ties back to an approved credit note, an early payment discount within terms, or a documented dispute resolution. Unapproved deductions require follow-up before you close the invoice.
Confirm the net payment total is mathematically correct. Add the individual invoice amounts, subtract all stated deductions, and verify the result matches the net payment total printed on the remittance. This checks the remittance's internal arithmetic, particularly when deductions are applied manually on the payer's side.
Match the net payment total to the actual bank deposit. The net amount on the remittance and the deposited amount must agree. A mismatch signals a partial payment, a bank fee deduction, or a remittance that was issued for a different transaction.
Post the payment and close resolved invoices. Once all amounts reconcile, apply the payment in your accounting system and close each fully paid invoice. Leave partially paid invoices open with the remaining balance clearly noted.
File the remittance with the payment record. Store the remittance advice alongside the bank statement entry, the original invoice(s), and any supporting credit notes. This documentation trail is what auditors and month-end reviewers will look for.

Workflow Recommendations

Standardize remittance requirements with your payers. Communicate exactly what you need on every remittance: invoice numbers, individual amounts, explanations for any deductions, and the net payment total. Specify your preferred format (electronic over paper) and delivery method (a dedicated AP email inbox or EDI channel). Payers who know your requirements upfront send cleaner remittances, which cuts your processing time.

Prioritize electronic remittance formats. EDI 820 transactions and structured PDFs reduce manual data entry and allow direct import into your accounting system. For high-volume AP departments, tools that extract data from financial documents can further reduce manual handling when remittance data arrives in unstructured formats such as PDF attachments or scanned documents.

Set a follow-up threshold for missing remittances. When a bank deposit has no matching remittance advice within three to five business days, escalate directly to the payer. Unmatched deposits that linger create suspense items that complicate month-end close and obscure your true cash position.

A remittance advice is a critical document for closing the payment loop in accounts payable. Understanding what each field communicates, recognizing which format your payers use, and applying a consistent verification process every time one arrives keeps your reconciliation accurate, your ledger clean, and your audit trail defensible.