A $50,000 payment arrives from a major customer—but 15 open invoices totaling $87,000 remain. The payment could cover the oldest invoices, include early payment discounts, or reflect short-pays from disputes.

Without remittance advice, you're left playing a guessing game that wastes time, creates errors, and delays posting payments to your accounts receivable ledger.

Remittance advice solves this puzzle by telling you exactly how a customer intended their payment to be applied. It's the instruction manual that comes with the payment.

For accounts receivable teams handling dozens or hundreds of payments daily, processing remittance information efficiently isn't just nice to have—it's essential. The faster you can match payments to invoices, the faster you can update your cash position, reduce Days Sales Outstanding (DSO), and keep your financial records accurate.

This guide covers remittance advice processing: what it is, where it comes from, how to process it effectively, and how modern AI automation is transforming this once-manual workflow into a straight-through process.

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Where Remittance Advice Comes From

Remittance advice is documentation from a customer that specifies how their payment should be applied to one or more invoices.

While the payment itself is the money that moves from your customer's bank account to yours, remittance advice is the information that tells you what that money is for. This distinction matters because payments and remittance advice often arrive through different channels and at different times.

Your customers can send remittance advice through multiple channels, and this variety is often the root cause of processing challenges:

Email: Many customers send remittance advice as a PDF attachment, in the body of an email, or as a CSV file. Your AR team might receive these at a dedicated email address like ar@yourcompany.com, or scattered across various team members' inboxes.

Check Stub: For customers still paying by check, remittance details often appear on the detachable portion of the check. When checks are deposited through a lockbox service, your bank scans both the check and the stub, providing images of both.

EDI (Electronic Data Interchange): Larger customers and those in industries like healthcare and retail often send structured remittance data through EDI formats (particularly the 835 in Healthcare) or ANSI X12 820 (general remittance) transaction sets.

Payment Portals: Many customers pay through accounts payable portals like Coupa, SAP Ariba, or Bill.com. Remittance details are available within these portals, but someone needs to log in and retrieve them.

Bank Remittance Information: Some payments arrive with remittance data directly in the bank file (e.g. BAI2 or MT940 formats), though this information is often limited to a basic reference number or short description.

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Real-World Remittance Formats

Remittance advice doesn't follow a single standard format, which is part of what makes processing it challenging. You might receive:

• A formal remittance advice document with a table listing invoice numbers, dates, amounts, and deductions
• A simple email stating "Payment for invoices 5001-5005"
• A spreadsheet with dozens of invoices and various adjustments
• A scanned handwritten note attached to a check
• A structured EDI file with hundreds of payment details in standardized fields

This inconsistency requires processing workflows that handle everything from highly structured data to completely unstructured information.

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Types of Remittance Advice

Not all remittance advice is created equal. Understanding the different types helps you set up appropriate processing workflows and set realistic expectations for automation.

Basic Remittance Advice

The simplest form of remittance advice provides minimal detail—just enough to identify what's being paid. You might see:

• "Payment for Invoice #12345"
• "March invoices - $15,000"
• A purchase order number or reference code

Basic remittance is better than nothing, but it still requires your team to make assumptions or do additional research, especially when the payment amount doesn't match the invoice total exactly.

Detailed Remittance Advice

Detailed remittance provides a complete breakdown of how a payment should be applied, including:

• Individual invoice numbers and dates
• Original invoice amounts
• Payment amounts applied to each invoice
• Deductions taken (discounts, credits, disputes)
• Credit memos applied
• Adjustments or withholdings
• Remaining balance after payment

This is the gold standard for remittance advice. When customers provide this level of detail, your cash application process becomes straightforward and accurate. You can post payments with confidence and quickly identify any discrepancies.

Electronic Remittance (EDI)

Electronic remittance via EDI formats like the 835 (Healthcare Claim Payment/Advice) or 820 (Payment Order/Remittance Advice) provides structured, machine-readable data. These formats follow specific standards that define where each piece of information appears.

The 835, for instance, includes segments for:

• Payer and payee identification
• Check/payment number and amount
• Individual claim or invoice details
• Adjustment reason codes
• Payment method

EDI remittance is highly automatable because the structure is consistent. However, you need EDI integration capabilities to receive and translate these files into formats your ERP system can consume.

Bank Remittance Information

When payments arrive via ACH or wire transfer, your bank statement might include remittance information in the transaction description field. This is typically limited to a set character count, so you might see:

• "INV 4523, 4524, 4531"
• "PO #89234"
• "PAYMENT MARCH"

Bank remittance information is convenient because it arrives with the payment notification, but the character limits mean it's often incomplete or abbreviated, requiring additional research to apply the payment correctly.

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The Challenge: Every Customer Sends Remittance Differently

Remittance processing becomes complicated when each customer uses different systems, formats, and delivery methods. Some customers email a PDF every Friday. Others upload remittance to their AP portal that you need to log into manually. Large retailers typically use EDI 820 files transmitted twice daily. Some include a note field in their ACH payment.

This lack of standardization means your AR team needs multiple workflows to capture all the remittance advice you receive, and automation solutions need to be flexible enough to handle every format and channel.

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The Remittance Processing Workflow

The workflow has five key steps:

1. Receive payment notification from your bank or payment system
2. Retrieve remittance advice from emails, portals, bank files, EDI systems, or by contacting the customer
3. Match remittance data to open invoices in your ERP, verifying amounts and identifying discrepancies
4. Apply payment in your ERP by creating cash receipts, applying to invoices, and posting deductions
5. Handle exceptions like short-pays, overpays, missing references, or disputes

In a manual workflow, every step requires human intervention:

• Checking multiple inboxes and portals for remittance
• Downloading and opening PDF files
• Manually typing invoice numbers into your ERP
• Cross-referencing spreadsheets
• Researching exceptions
• Following up with customers for missing remittance

Companies processing dozens of payments daily often dedicate several hours to manual cash application. Scale that up to enterprise volumes, and you're looking at entire teams dedicated just to this process.

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Common Remittance Processing Challenges

Even with well-defined processes, AR teams face recurring challenges that slow down cash application and create errors.

Missing Remittance Information

A common problem: you receive a payment but no remittance advice whatsoever. The customer simply sent money without telling you what it's for. Now you need to:

• Email or call the customer to request remittance details
• Wait for their response (could be hours or days)
• Make educated guesses based on aging invoices or payment patterns
• Hold the payment as unapplied cash until you can research it

Missing remittance is surprisingly common, especially with smaller customers or those using basic ACH payment methods. It's one of the primary causes of delayed payment posting and increased DSO.

Remittance in Unstructured Formats

Even when customers provide remittance advice, it might come in formats that are difficult to process:

• Scanned handwritten notes
• Screenshots of their accounting system
• PDF tables that don't copy-paste cleanly
• Email body text without clear structure
• Image files instead of text documents

Extracting data from unstructured formats requires manual typing or advanced OCR (Optical Character Recognition) technology. Manual typing is slow and error-prone. Basic OCR often struggles with poor image quality, handwriting, or complex table layouts.

Customer Portals Requiring Manual Login

Many large customers require vendors to access remittance advice through their accounts payable portals. This means:

• Maintaining login credentials for dozens of different portals
• Manually logging in to check for new remittance
• Navigating different portal interfaces (each works differently)
• Downloading files one at a time
• Dealing with portal outages or password resets

An AR specialist at a large company might need to manage logins for 50+ customer portals. Just checking all the portals for new remittance can take an hour or more each day.

Payment Doesn't Match Remittance Amount

Sometimes the payment amount and the remittance advice total don't match. For example:

• Remittance says $10,000 for three invoices
• Bank shows a $9,500 payment received
• Now you need to figure out where the $500 discrepancy came from

Mismatches require research to determine whether the customer took an additional deduction, there's a bank fee you weren't aware of, or one party made an error. You can't post the payment until you resolve the discrepancy.

Multiple Invoices Paid in One Payment

While detailed remittance advice handles this well, basic remittance for multi-invoice payments creates ambiguity. If a customer sends $50,000 and just says "Payment for April invoices," you need to:

• Identify which invoices were due in April
• Determine the intended payment order
• Verify the total matches
• Make judgment calls if the total doesn't align perfectly

This guesswork introduces errors and requires time-consuming research when discrepancies arise.

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The Cost: Time, Errors, and Delayed Posting

These challenges can add up to huge costs:

Time: Manual remittance processing can take 5-10 minutes per payment (simple cases) to 30+ minutes. Truly challenging payments - those with missing remittance, multiple portals to check, or significant discrepancies - can consume up to 3 full days of an AR specialist's time for a single payment. With hundreds of payments monthly, this consumes substantial staff time.

Errors: According to multiple industry studies, manual data entry error rates typically range from 1-3%. Even at a 1% error rate, processing 1,000 payments means 10 errors requiring correction—wrong invoice numbers, transposed digits, incorrect amounts. Each error impacts accuracy and may affect customer relationships.

Delayed posting: When remittance is missing or difficult to process, payments sit as unapplied cash. This delays recognizing the cash on your AR aging, inflates DSO metrics, and creates inaccurate cash flow reports. Payments that could be posted same-day might sit for days or weeks.

Delayed collections: Without accurate posting, you risk starting collections on already-paid invoices, damaging customer relationships. Delayed posting cascades into delayed collections communications and delayed customer payments, extending DSO far beyond the initial delay.

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How AI Automates Remittance Processing

Modern AI-powered solutions transform remittance processing from a manual, time-intensive workflow into an automated, accurate process.

Automatic Remittance Retrieval

AI agents can automatically retrieve remittance advice from all common sources:

Email monitoring: AI continuously monitors your AR inbox (and other designated email addresses), identifying which emails contain remittance advice and extracting it automatically. No more manually reviewing every email.

Portal automation: Fazeshift's AI agents can log into customer AP portals using your credentials, navigate the portal interface, check for new remittance files, download them, and add them to your processing queue—all without human intervention.

Bank file processing: AI automatically processes bank statements (BAI2, MT940, etc.) and extracts any remittance information included in transaction descriptions.

EDI integration: AI systems can receive and translate EDI 835/820 files, converting the structured data into formats your processing workflow requires.

This automatic retrieval eliminates the daily hunt for remittance across multiple systems, saving hours of manual work.

AI can Extract Data from Any Format

AI agents can extract remittance data from virtually any format:

• PDF tables (even those that don't copy cleanly)
• Scanned check stubs and documents
• Screenshots and images
• Printed text and clearly written notes

The AI learns to identify key information—invoice numbers, amounts, dates, customer references—regardless of how it's formatted. It can handle variations like "Invoice #12345," "Inv 12345," or "12345" and understand they refer to the same thing.

This means you're no longer limited to processing only structured data. Unstructured remittance that used to require manual typing now flows through automatically.

Intelligent Matching to Open Invoices

AI matching algorithms compare remittance information against your open AR, using multiple matching strategies:

• Direct invoice number matching
• Fuzzy matching for slight variations in invoice numbers
• Amount matching when invoice numbers aren't provided
• Customer-specific payment patterns learned over time
• Business rules for resolving ambiguous matches

The system can handle complex scenarios, like matching a $50,000 payment to the correct combination of invoices when multiple valid combinations exist, by considering factors like due dates, aging, and historical payment behavior.

Exception Handling and Recommendations

For payments that can't be automatically matched, AI doesn't just fail—it provides recommendations:

• "This payment is $500 short. Customer historically takes a 2% discount. Recommend posting with discount and closing invoice."
• "Invoice #5432 not found. Did customer mean #5342? (amount matches)"
• "Payment amount suggests these 5 invoices, but remittance only lists 4. Recommend review."

These intelligent recommendations accelerate exception resolution, turning what used to be 30-minute research projects into quick review-and-approve decisions.

Straight-Through Processing Rates You Can Achieve

Industry data shows that a good straight-through processing rate is typically considered 80% or higher. With AI automation, companies can achieve straight-through processing rates—payments that go from receipt to posted without human intervention—in this range or higher for companies with reasonably consistent remittance from most customers.

This means:

• 80-90% of payments posted within minutes of receipt
• Manual effort focused only on genuine exceptions
• Same-day cash posting becoming the norm rather than the exception
• AR specialists freed up for strategic activities like dispute resolution and customer relationship management rather than data entry

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Best Practices for Remittance Management

• Request structured remittance formats from key customers - For your largest customers representing the most payment volume, provide remittance advice templates they can use, request EDI if both parties have the capability, and establish dedicated email addresses where they send remittance. While you can't control every customer's process, influencing even your top 20 customers significantly improves overall processing efficiency.
• Centralize remittance receipt - Create a single email address (like remittance@yourcompany.com) as the central point for all emailed remittance advice. Include this email on all invoices and in communications with customers. This makes it easier to monitor incoming remittance, set up automation rules, and ensure nothing is missed across multiple team member inboxes.
• Document your remittance sources - Maintain documentation of where and how you receive remittance from each significant customer (email PDF, AP portal login, EDI file via VAN, ACH addenda field, etc.). This documentation helps when training new team members, setting up automation, troubleshooting missing remittance, and identifying opportunities to improve processes with specific customers.
• Set up standard reconciliation rules - Develop clear rules for handling common scenarios: when remittance is missing (apply to oldest invoices first, or hold as unapplied cash?), minor discrepancies (auto-approve and write off, or research every one?), overpayments, and short-pays without clear deduction reasons. Standardizing these rules creates consistency, enables automation, and reduces the decision-making burden on your AR team.
• Monitor remittance processing time - Track key metrics like average time from payment receipt to posting, percentage of payments posted same-day, percentage requiring manual research, and most common reasons for exceptions. Monitoring these metrics helps you identify bottlenecks, measure improvement from process changes or automation, and prioritize which remittance processing challenges to tackle first.

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Conclusion

Efficient remittance processing is the foundation of fast, accurate cash application. When you can quickly and reliably match payments to invoices, you reduce DSO, improve cash flow visibility, and free your AR team to focus on strategic activities rather than data entry.

The traditional manual approach—checking emails, logging into portals, typing data from PDFs—simply doesn't scale in modern business environments where payment volumes are increasing and customers expect same-day payment processing.

AI automation transforms remittance processing from a manual bottleneck into a competitive advantage, enabling straight-through processing rates that were impossible just a few years ago.

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FAQs

What is remittance advice and why does it matter for cash application?

Remittance advice is documentation from your customer specifying exactly how their payment should be applied to specific invoices. While the payment itself is the money moving between accounts, remittance advice is the instruction manual telling you what that money is for. Without it, you're left guessing how to apply a $50,000 payment across 15 open invoices totaling $87,000. Should you apply it to the oldest invoices? Does it include early payment discounts? Are there short-pays from disputes? Remittance advice eliminates this guesswork. The faster you can accurately match payments to invoices using remittance information, the faster you update your cash position, reduce DSO, and keep financial records accurate. Without remittance, payments sit as unapplied cash for days while your team researches intent, inflating DSO and creating inaccurate cash flow reports.

How should I handle missing remittance information from customers?

Start with immediate outreach—email or call the customer to request remittance details, but don't wait indefinitely. Establish clear internal rules for how long you'll hold unapplied cash before making educated applications based on aging and payment patterns. For repeat offenders, implement proactive measures: include remittance instructions prominently on invoices, provide simple templates customers can use, and establish dedicated email addresses like remittance@yourcompany.com. Consider making remittance submission part of your payment terms for large customers. The most effective approach combines prevention (making it easy for customers to provide remittance) with systematic escalation (clear timelines for research and application). Track which customers consistently fail to provide remittance and address it during quarterly business reviews. Modern AI automation can help by monitoring your AR inbox, logging into customer portals automatically, and immediately flagging payments arriving without remittance.

What's the difference between basic and detailed remittance advice, and which should I request from customers?

Basic remittance provides minimal detail like "Payment for Invoice #12345" or a purchase order number, forcing your team to research when amounts don't match exactly. Detailed remittance provides complete breakdowns: individual invoice numbers, original amounts, payment amounts applied to each, deductions taken, credit memos, and adjustments. This is the gold standard because it makes cash application straightforward and accurate. While you can't control every customer's process, focus improvement efforts on your top 20 customers representing the most payment volume. Provide them with remittance templates, request EDI if available, and establish dedicated channels. Even shifting your largest customers from basic to detailed remittance dramatically improves efficiency. For smaller customers, invest in AI automation that handles format variety rather than attempting to change hundreds of different customer behaviors.

How does AI automation handle customer AP portals that require manual login?

AI agents can automate portal login and file retrieval for most major AP portals including Coupa, SAP Ariba, Bill.com, and others. The system uses your credentials to log in automatically on scheduled intervals, navigates the portal interface, checks for new remittance files, downloads them, and adds them to your processing queue—all without human intervention. This eliminates the daily task of manually logging into dozens of portals that can consume an hour or more. The automation handles typical portal challenges like session timeouts and can retry if portals are temporarily unavailable. Fazeshift's AI agents are specifically designed to handle the variability of different portal interfaces rather than requiring custom integration with each portal—they adapt to interface changes the way a human would. For companies managing logins for 50+ customer portals, this single automation capability often justifies the entire platform investment.

How does AI automation improve remittance processing?

AI automation transforms remittance processing from a manual, time-intensive workflow into a straight-through process. Modern AI platforms automatically retrieve remittance advice from all sources—continuously monitoring AR inboxes, logging into customer AP portals, and processing bank files without human intervention. The AI extracts data from any format, whether structured EDI files or unstructured handwritten notes and scanned documents. Intelligent matching algorithms compare remittance information against open AR using multiple strategies: direct invoice matching, fuzzy matching for variations, amount matching, and customer-specific payment patterns learned over time. For exceptions, AI provides smart recommendations rather than just failing—suggesting likely matches and highlighting discrepancies for quick resolution. Companies with reasonably consistent remittance from most customers typically achieve 80-90% straight-through processing rates, with most payments posted within minutes of receipt. This frees AR teams from hours of daily manual work to focus on complex exceptions, dispute resolution, and customer relationships.

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