What is a Remittance Letter?

Also known as a letter of remittance or a transit letter, a remittance letter is a document that is enclosed with a payment. The purpose of the letter is to reference the reason for the payment or remittance, as well as supply other information that will assist the creditor in recording the receipt of the payment properly. While the exact contents of the letter will vary depending on the nature of the business arrangement and local custom, there are a few basic details that are considered essential for a well-written transit letter.

Just about any kind of remittance letter will include three basic pieces of information. The letter will identify the sender, often by including the name and mailing address of the debtor. Along with the sender’s contact information, the name and address of the creditor is also referenced. Finally, the amount of the enclosed payment is also included in the body of the letter.

Other types of information may also be included in the text of the remittance letter. In many areas, including the account number of the debtor is considered proper, along with a reference to any invoice number to which the payment should be applied. There may also be a reference to the goods or services that were purchased by the customer, or a notation of the date when the invoice is due.

The overall format for a remittance letter is brief and to the point. Often, the letter begins with the date of the correspondence, followed by the name and mailing address of the recipient. Using a simple salutation, the sender details in one or two paragraphs the reason for the payment, and any data that will help the recipient apply the payment properly. A standard closing follows, accompanied with the signature of the sender. If the mailing address for the sender is included in the letter, it normally appears after the signature, at the end of the document.

While a remittance letter is still often used in formal business situations, such as when one bank is forwarded a check to another bank, this form of correspondence has largely been replaced by what is known as the remittance slip. The slip is simply a perforated section of an invoice that can be detached and returned with the payment. Data such as account numbers and due dates are pre-printed on the slip, making it unnecessary for the sender to reference that information. There is usually room on the slip for the sender to write in information like the check number or the date of the payment