What is Payment Advice in Banking and Finance

If you run a business, you know how important it is to keep track of money —payments, invoices, money from customers, whatever it may be and this applies to any operation, large or small. When you invoice a customer, you want to ensure the payment has been collected. Alongside financial management, proper documentation also helps you stay audit-ready and facilitates the reconciliation of your accounts. Proper invoicing displays professionalism to clients, enhancing their trust in you. 

This is where payment advice notes come in. In this guide, we go through what payment advice slips are, their components, examples, and more!

Payment advice (also known as remittance advice or payment notification) refers to a document sent by the payer to the receiver regarding a pending payment. For example, if a customer has issued a payment on a particular invoice, they will provide a remittance advice. 

But what is payment advice in banking, and is it the same thing? Often, banks will issue remittance advice on behalf of the customer or payer. The bank responsible for facilitating the payment will send the receiver the document containing details about the transaction. It is essentially like a formal acknowledgment of payment. 

This document often includes details such as the invoice, reference number, bank transfer details, payment method, amount, date, and more. The information provided in these documents enables your business to reconcile payments, close invoices on your accounts payable, and perform additional tasks. 

This is critical for financial accounting and auditing. It can also be helpful for high-value ACH and international wire transfers, since these usually involve larger amounts and multiple parties. Lastly, payment advice helps to reduce the potential for errors and disputes in financial records. 

In today's world, most businesses use some software to generate payment advice slips and other documents. The most commonly used method is SAP/ERP payment advice generation. These systems enable your company to generate statements and remittance advice, while also tracking which invoices have been paid and which are pending. 

• First, a customer must purchase a good or service from a business. 
• They will then send payment advice to the supplier or businesses they have bought from, indicating which invoice has been paid for and the payment method used. 

Payment advice slips typically include details such as the payment method, payment information, invoice and reference numbers, and more. Let's take a deeper look at the standard fields that are typically included in remittance advice:

1. The name and address of the payer 

This section outlines the information about the payer. It enables your business to track and understand who is making the payment. It could include the name, address (of an individual or company) and other personal or business information. 

2. The name and address of the recipient 

Next, the remittance advice will also contain a field containing the recipient or beneficiary. This also generally includes the recipient's name and address, email, phone number, and other information. 

3. The invoice number and payment amount

The remittance advice will also include the original invoice number issued by the business. The amount paid to the recipient must also be specified. 

4. Method of payment and date of issuance

Lastly, the date the payment was made and the method of payment must be specified. For example, was the payment made via check, wire transfer, digital payment, a payment processing platform, or an alternate method?

Payment or remittance advice is broadly divided into two types: hard copies and soft copies. These include email payment advice, paper-based payment advice, EDI-based payment advice, and web-based payment advice.

1. Email payment advice 

Email remittances refer to when the buyer or payer sends the payment information via email. It can be included in the body of the email or as an attachment, and has become increasingly common due to the digitization of global markets. 

2. Paper-based payment advice

Paper-based remittance advice refers to paper-based documents. These documents contain the same information as other remittance advice notes. However, the paper-based method is becoming less common in the modern world. 

3. EDI-based payment advice 

EDI's (or Electronic Data Interchange) are alphanumeric codes that can be sent through EDI machines. This method is ideal for companies making and processing large volumes of payments, allowing them to automate their accounts receivable processes.  

4. Web-based payment advice

Web-based remittance advice refers to sending payment advice notes via a web portal (other than email). Large retailers like Amazon often use this method, since it makes it easier for businesses to process high volumes of transactions from individual customers (as opposed to the companies). The recipient is often notified via email, SMS, or other notifications when the payment advice has been created.

Payment receipts and payment advice sound similar, but refer to very different documents. They differ in who issues them, their purpose, and more. Let's take a look:

Payment advice and remittance advice are two terms that are often mistaken for being different. However, they both refer to the same payment document. Payment advice and remittance advice both refer to documents generated by banks (or sometimes by the individual or company making the payment) on behalf of payers. 

They detail the invoice number, payer's information, recipient's information, and more. However, the term "payment remittance" may also be confused with "payment/remittance advice." Payment remittance refers to the exchange of funds via a transfer (usually a wire or electronic transfer) and is widely used for international transactions.  

Payment remittance and remittance advice are not related terms. Remittance advice is a form of communication sent by a payer or customer to the recipient (the supplier or company). In contrast, remittances refer to the actual transfer of funds itself.

Direct debit and payment advice refer to two separate processes. Let's take a look:

Payment advice notes play a central role in the world of banking, business, and more. Some reasons why they are critical include the following:

• Legal requirements: Payment advice slips are legally recognized documents. They act as evidence of a payment transaction, which is helpful for regulatory and compliance requirements. 
• Disputes: Payment advice notes can be valuable tools in case of payment disputes or discrepancies. They can clarify payment details and resolve problems. 
• Financial records: Payment advice also helps companies (both the sender and the recipient) maintain accurate financial records. This makes the auditing and reconciliation process smoother. 
• Better transparency: Payment advice notes often include detailed information regarding transactions. This helps to promote transparency in financial operations and record-keeping. 

When dealing with payment advice, many challenges could potentially arise, especially when dealing with multiple channels, reconciliation, and more. Let's take a closer look below:

1. Multiple channels 

As electronic channels gain popularity, businesses are now required to capture and record remittance advice from multiple different avenues. Without a system in place to streamline these, multiple channels could lead to duplicated data, incorrect entries, delays, and more. 

2. Reconciliation problems  

When dealing with payment advice for multiple invoices and items, businesses may encounter difficulties reconciling payments with the correct accounts. This discrepancy could lead to delays and errors.   

3. Timely processing of payments 

Remittance advice can also pose challenges when it contains incorrect or incomplete information, is delayed, or is missing altogether. These difficulties could lead to inefficiencies, payment processing delays and errors, and other issues. 

Remittance advice slips are used in almost every industry today, from retail to food to manufacturing. Below, we outline some commonly used examples of remittance advice in different sectors: 

Example 1: Payment advice in the retail industry 

In many retail stores, customers typically pay using cash, credit or debit cards, digital wallets, and other instant methods. In many cases, these instant payments and receipts sometimes replace the need for payment advice.

However, some may have credit accounts for purchasing from a particular seller. In these cases, the seller may receive a payment advice note with the payer’s account number, personal information, and payment details. 

Example 2: Use cases in the manufacturing industry 

Manufacturing is an industry where purchases are often made in bulk and regularly. For this reason, many manufacturers will issue customers a monthly account statement.

Most manufacturing companies use payment advice containing detailed information (like customer account numbers, contact details, invoice numbers, dates of issuance, balances due, payment method, and date paid). 

As globalization leads to stricter regulations, and technology allows for high volumes of transactions and manufacturing, the invoice and accounts receivable reconciliation process can become complicated. This is where Xflow comes in. 

Xflow simplifies your reconciliation process, enabling you to process large volumes of transactions with complete accuracy. Here's what our platform offers: 

• Xflow automatically matches invoices with their corresponding purchase orders and payments, reducing manual intervention and checks. 
• Duplicate invoice entries are instantly flagged, preventing discrepancies and errors later down the road. 
• Xflow offers live payment tracking and instant alerts. 
• It maintains a complete audit trail, meeting requirements like SOX, internal audit, and other policies.

Our platform remains the top solution, and can connect with ERP systems like Zoho Books to create an automated reconciliation experience. With Xflow, your financial teams can focus more on financial strategy and planning, instead of worrying about manual errors and repetitive reconciliation tasks, leading to faster cycle times.

We go beyond the standard reconciliation capabilities, offering faster settlement processing, enterprise-level compliance features, and transparent fee disclosure. 

Sign up for Xflow today!