What To Include in the Remittance Invoice
This document can come in a variety of forms. What companies include will ultimately depend on the internal policies. Here is some of the information most commonly found in these documents:
- The amount of money sent and why it’s applied to certain accounts
- Confirmation of the payment method used
- The contact information for both the payer and recipient
- Receipt number, invoice number, or timestamp for easier tracking
Whenever you need to send remittance receipts to your clients, it’s essential to use language that both parties understand. This will help prevent any confusion and ensure easier business transactions in the future.
3 Main Types of Remittance Receipts
Before you create this document, determine which type works best for your business or the needs of the particular scenario. Consider the following types:
- Basic: This is a straightforward document that contains minimal but essential information. It might only state the invoice number and how much to apply.
- Removable: Creditors can encourage the use of remittance receipts by sending a removable one with the invoice. Customers can then fill these out and send them back with payments.
- Scannable: Many companies send remittance documents through the mail or email. Some of these might have scannable codes that allow businesses to track payments easily.
How To Send Remittance Receipts
There is no standard for sending remittance receipts. Customers can use whatever method feels more natural and convenient. Ideally, they use methods that coincide with the way they pay. For example, a person who paid electronically should attach a PDF or send a separate email. Meanwhile, someone who pays by check might send the slip with the check in the mail.
Businesses can simplify this by making it easy for customers to know where to send remittances. For example, removable slips might include the following information:
- A QR code that takes the customer to the page for uploading a PDF copy
- Instructions on how to attach a scanned version of the completed document with electronic payments
- The preferred email address for sending an electronic copy
- The physical mailing address for customers who prefer snail mail
The Benefits of Using Payment Remittance Advice
The accounts receivable team prefers to receive this document with invoice payments, and some customers are happy to send them. Others might see it as an extra step that isn’t worth the trouble. Here are some benefits of sending and receiving remittance documentation with invoices.
Fewer Incorrectly Applied Payments
When companies receive remittance documents with payments, it’s easier to ensure those funds are applied correctly. This reduces the risk of a mistake causing late fees or other issues. It also reduces the risk of money sitting untouched in temporary accounts for extended periods.
Better Customer Service
Remittance receipts provide specific details on why customers paid certain accounts and who needs to provide documentation if there is an issue with the payment. This improves communication between the payer and recipient, leading to a smoother business relationship in the long run.
Reduced Interest Payments
Creditors tend to automatically apply payments to interest and fees before the principal balance. Doing so benefits the creditor, but it is more beneficial to the debtor to reduce the principal balance first. Remittance receipts can instruct creditors to prioritize the principal when sending partial payments.
Best Practices for Using Remittance Receipts
Whether you send or receive remittance receipts, some best practices can help you simplify the process. Consider the following.
Invest in Storage
While remittance receipts bring valuable benefits to a business, they still take up extra storage space. Some companies might choose to store physical and electronic copies, but your best bet is to store everything electronically in the cloud.
Educate Your Customers
Remittance slips can confuse customers who might still need to learn what they are or why they matter. Make sure your customers fully understand the benefits of sending remittance receipts for themselves and for you. An email campaign and brochures could rectify this ahead of sending removable remittance documents with invoices.
Always Check Accuracy
Never assume the document is error-free. Both creditors and debtors should always double-check that the payment remittance advice is correct before applying it to an account or accepting payment.
Gaviti provides one of the leading accounts receivable software options on the market. We make it easy for our customers to personalize invoices, remittance documents, and payment processes that meet their business needs. Book a demo to see how it works.