On remote SQL server, I created a local account for this with sysadmin privileges in SQL
This will account for part of the issue. The account created on the remote SQL Server must be a DOMAIN account, that domain account must be granted 'sysadmin' privileges on the SQL Server instance, and that domain account must be the account used to install Patch Manager.
As with WSUS, the Patch Manager server and remote SQL Server must exist in the same AD Domain, or have a Domain Trust established between them. As such, Local Accounts cannot be used for this purpose.