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Invoicing & Payments

Remittance Advice

A remittance advice is a note from the buyer telling the seller which invoices a payment covers. It lists invoice numbers, amounts paid, and any deductions or discounts taken. Without it, the seller's accounts receivable team cannot apply a lump-sum payment to the right invoices. In EDI it travels as the 820.

What a remittance advice includes

A useful remittance advice lets the seller apply the payment without calling the buyer.

  • Payer name and payment reference, such as the check or ACH trace number
  • Payment date, method, and total amount
  • Each invoice number paid, with the invoice amount and the amount paid
  • Discounts taken, such as a 2% early payment discount
  • Deductions, with reason codes, for shortages, damages, or chargebacks

How remittance advice is delivered

The format usually follows the payment method.

DeliveryTypical use
Check stubPaper checks
Email or PDFACH and wire payments from smaller buyers
EDI 820Large retailers and distributors with EDI programs
ACH CTX addendaPayment and remittance data travel together in one ACH transaction
Supplier portalRetailers that publish payment detail online

Why it matters for cash application

A retailer may pay 40 invoices with one ACH deposit and short-pay several of them. The remittance advice is the only record of which invoices were paid in full and why the others were reduced. Deductions that are not captured and disputed within the retailer's window, often 30 to 90 days, usually become permanent losses.

Related Terms

Invoice
An invoice is the seller's request for payment. It lists what was sold, quantities, prices, taxes, the total due, and the payment terms, and it references the buyer's purchase order. The buyer matches it against the PO and the goods received before paying. In EDI the invoice is the 810 transaction.
Retail Chargeback
A retail chargeback is a financial deduction a retailer takes from a supplier's payment for failing to meet a compliance rule, such as a late shipment, a missing or wrong ASN, a bad label, or an inaccurate invoice. Chargebacks erode margin and are usually preventable with accurate, on-time EDI.
Three-Way Match
A three-way match is an accounts-payable control that compares three documents before an invoice is paid: the purchase order, the receiving record, and the supplier invoice. The quantities, prices, and terms must agree across all three. If they match, payment is approved. If they do not, the invoice is held for review.

Learn More

EDI 820 Payment Order/Remittance Advice GuideEDI 812 Credit/Debit Adjustment GuideEDI Payments Explained

Related Resources

EDI GuideEDI 810 Invoice: Complete GuideEDI GuideEDI 824 Application Advice: Complete GuideBlog PostWhat Does EDI Capable Mean? Requirements GuideBlog PostEDI Integration: What It Is and How It Works

Frequently Asked Questions

No. A receipt confirms the seller received payment. A remittance advice comes from the buyer and explains what a payment covers.

It is not legally required, but most B2B sellers ask for one, because applying payments without it is slow and error-prone.

Sources: Nacha: ACH payment formats, X12 transaction set index

How to Answer "Are You EDI Capable?"

A buyer asked, and you need to answer this week. The four things they are checking, what you can say yes to today, and a realistic date for the rest.

  • What a buyer is really asking when they ask this
  • The minimum set-up that makes the answer yes
  • What you can answer today versus what needs building
  • Rough timelines, so you can give a date rather than a maybe

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