What is advice of credit?

An advice of credit is a formal notice issued by a bank, payroll provider, or payment processor to confirm that funds have been deposited into a recipient’s account. For small business owners, this document is an important part of managing payroll, vendor payments, and client transactions. It gives you a verified paper trail that a payment has gone through—offering peace of mind and making reconciliation easier.

Advice of credit notifications are often generated automatically when you process a direct deposit, ACH transfer, or wire payment. They include specific transaction details that help both you and the recipient keep track of when and how money moved. These documents are especially helpful when questions arise about the timing, accuracy, or delivery of funds.

What does an advice of credit contain?

Typically, an advice of credit includes the following information:

• Payment date – The day the funds were credited to the recipient’s account
  
  
• Amount deposited – The total amount received, often listed with net and gross breakdowns
  
  
• Reference or advice number – A unique transaction ID that allows both parties to trace the payment
  
  
• Sender information – Business name, account number, or payroll provider details
  
  
• Recipient information – Name and partial account number for the person or business receiving funds
  
  
• Description or memo – Notes about what the payment is for (e.g., payroll for Week 12, invoice 1356, expense reimbursement)
  
  

This notice serves as proof of payment, which can be especially useful for payroll compliance, audits, or employee questions.

Why advice of credit matters to employers

If you run payroll, process reimbursements, or pay vendors via direct deposit, advice of credit documents provides clear and trackable confirmation that your payments are going through. Here’s why that matters:

• Reduces payment disputes – If an employee or contractor claims they didn’t get paid, you can provide the advice as proof.
  
  
• Supports audit readiness – Advice of credit helps you maintain clean records for tax season or labor audits.
  
  
• Improves trust and transparency – Your team can count on accurate, consistent documentation for every payment.
  
  
• Enables faster troubleshooting – If there's a delay or error, having an advice number speeds up support with banks or payroll providers.
  
  
• Keeps accounting aligned – You can match advice numbers to ledger entries, making reconciliation faster and more accurate.
  
  

In other words, this isn’t just an administrative detail—it’s a foundational tool for managing your business responsibly and efficiently.

Use cases for small businesses

1. Payroll: After running payroll through a provider like Homebase, each direct deposit includes an advice of credit that documents how much was paid, to whom, and when. This helps business owners keep track of wage payments, bonuses, reimbursements, and garnishments.

2. Vendor payments: When paying freelancers, consultants, or suppliers via ACH, the advice of credit serves as a formal confirmation. It can also be shared with vendors for their own internal tracking.

3. Loan and grant receipts: If your business receives external funding, your bank may issue an advice of credit to let you know the money has landed. This is especially useful for programs like SBA loans or government grants.

4. Internal transfers and reimbursements: If your company reimburses employees for mileage, travel, or equipment, the advice of credit gives a timestamped trail of when the reimbursement occurred.

Advice of credit vs. remittance advice

Although they sound similar, these two documents serve different purposes:

• Advice of credit tells the recipient that funds have been deposited.
  
  
• Remittance advice tells the payee what the payment is for, usually breaking it down by invoice or item.
  
  

You may choose to issue both in situations like vendor payments or employee expense reimbursements.

How to manage advice of credit records effectively

To make the most of these documents:

• Store them digitally – Either in your payroll software or a secure internal system.
  
  
• Match them to journal entries – Use the advice number to link payments with bank records.
  
  
• Use them to verify payment delivery – Especially important when dealing with remote workers or contractors.
  
  
• Include them in onboarding packets – Let employees know what to look for in their direct deposit notifications.
  
  

How Homebase payroll simplifies direct deposits and recordkeeping

Homebase makes paying your team simple, accurate, and secure. Every direct deposit processed through Homebase payroll includes detailed records like payment date, amount, and advice number, giving you and your team full visibility into each transaction.

With Homebase, you can:

• Automatically generate pay stubs and advice of credit details
  
  
• Pay employees via ACH direct deposit
  
  
• Track labor costs and wage history in real time
  
  
• Export payroll records for accounting and audits
  
  
• Stay compliant with wage laws and IRS tax filing requirements
  
  

Explore Homebase payroll to streamline your payroll process, reduce manual errors, and give your employees the documentation they need—every payday.

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