What is an EDI Payment? EDI 820 I Payment Order or Remittance Advice

An EDI 820 is a payment order or remittance advice document which is sent in response to EDI 810 (Invoice). Generally, it is used to communicate initiation of a payment by a buyer to a seller. This streamlines and fastens the payment process like the overall order cycle because both parties have visibility and transparency into payment details. Businesses are seen to improve their cash flow with an efficient process like EDI.
What does an EDI 820 involve?
An EDI 820 involves information about the payer and payee name and address, total amount, method of payment, account and bank routing information, currency, credit or debit information, check number and payment date.
How do EDI payments work?
As soon as the buyer receives an invoice (EDI 810) from the seller, the buyer sends out the payment remittance information in the form of an EDI 820 to the seller to show the intent to pay. Then, the seller transmits this information to its bank for receiving the payment through EDI or any other method decided between the two entities.
The bank receives the information from the seller (through EDI or any other mode) and converts it into the format necessary for its transmission through the Automated Clearing House (ACH) as an ACH transaction. The ACH processes the payment and its associated information to the seller’s bank. Then, the bank credits the seller. The seller receives a notification that the funds are posted in the company’s bank account.
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