What are EDI Payments?

EDI payment process involves the exchange of electronic documents and the automation of financial transactions, allowing businesses to streamline and automate their financial processes.

What are EDI Payments

Introduction to EDI Payments

EDI payments refer to the use of EDI to facilitate the exchange of payment information between two parties. This can include information such as the amount of the payment, the payment method, and any relevant details about the payment, such as the invoice number or the reason for the payment.

EDI is not a form of payment. It is a data format used for computer-to-computer data and message exchanges for a variety of payment and payment-related processes. EDI, unlike EFT and ACH, is typically used to format business invoices and remittance information.

EDI payments can be used for a variety of purposes, including paying invoices, making employee payroll payments, and settling accounts between businesses. EDI payments are typically faster and more efficient than traditional paper-based payment methods, as they can be processed automatically and do not require manual intervention. They also reduce the risk of errors or fraud, as the information is transmitted electronically rather than entered manually.

An EDI payment uses globally accepted standards to transmit payment data between your customers, suppliers, and trading partners. Since EDI payments are quick and use a consistent way of exchanging data, businesses across industries use it via a direct connection to their trading partners, or they outsource the EDI connections via VANs/brokers.

What payment-related information is exchanged using EDI Transactions?

Details of the payer and payee: Name and address

Payment information: Credit/debit card or bank information

Transaction details: invoice number, purchase order, reference number

Currency: The total amount in the currency to be exchanged

Check or payment number & Payment amount

The payment date/remittance date

What is an example of an EDI Payment Transactions?

Remittance information


Purchase Orders

Inventory and customs documents

Shipping Notices

Bills of Lading

Manual Payment Process Vs EDI Payment Process

Manual Payment Process

The manual payment process typically involves the following steps:

  1. Generating an invoice: A business generates an invoice and sends it to the customer, either by mail or electronically.
  2. Receiving payment: The customer reviews the invoice and decides how to pay it. This may involve writing a check or making an electronic payment using a credit card or online payment service.
  3. Processing payment: The business receives the payment and processes it manually, either by depositing the check or entering the payment information into their accounting software.
  4. Recording payment: The business records the payment in their financial records and updates the customer's account to reflect the payment.

Overall, the manual payment process involves a series of manual steps that can be time-consuming and prone to errors. In contrast, EDI payments allow businesses to automate and streamline their financial processes, improving efficiency and reducing the risk of errors.

EDI Payment Process

The EDI payment process typically involves the following steps:

  1. Setting up an EDI system: To use EDI payments, businesses must first set up an EDI system, which involves installing software and establishing connectivity with trading partners.
  2. Sending and receiving EDI documents: Once the EDI system is set up, businesses can begin sending and receiving EDI documents, such as invoices and payment instructions. These documents are typically transmitted via a secure network or through an EDI service provider.
  3. Validating and processing EDI documents: When an EDI document is received, it must be validated to ensure that it is complete and conforms to the necessary standards. If the document is valid, it can be processed automatically or manually, depending on the business's preferences.
  4. Making or receiving payments: If the EDI document contains payment instructions, the payment can be processed automatically through the EDI system. This may involve debiting or crediting the appropriate bank accounts or other financial accounts.

Why Businesses Should Use EDI Payments?

EDI payments can help businesses streamline and automate their financial processes, improving efficiency and saving time and resources. By automating manual tasks such as invoice processing, businesses can reduce the risk of errors and improve the accuracy of their financial data.

EDI payments can also help businesses save money on paper, printing, and postage costs, as well as streamline their supply chain processes. For example, the EDI 820 payment, which is a type of EDI transaction specifically designed for handling payment instructions, can help businesses automate the payment process and reduce the need for manual intervention.

Overall, EDI payments offer a number of benefits to businesses looking to improve their financial processes and reduce costs. By using EDI payments, businesses can streamline their financial operations and improve their productivity, making it easier to focus on other important tasks.

5 Benefits of Using EDI For Payment Processing

1. Efficiency: EDI payments can be processed automatically, which reduces the need for manual intervention and helps to streamline the payment process. This can save time and reduce the risk of errors.

2. Accuracy: EDI payments are less prone to errors than manual payment methods, as the information is transmitted electronically rather than entered manually. This can help to reduce the risk of fraud and ensure that payments are made accurately and on time.

3. Cost savings: EDI payments can help to reduce the costs associated with processing payments, as they eliminate the need for paper-based processes and can be transmitted electronically at a lower cost than traditional payment methods.

4. Improved cash flow: EDI payments can help to improve cash flow by enabling faster payment processing and reducing the risk of errors or delays. This can help businesses to manage their finances more effectively.

5. Improved relationships with suppliers: EDI payments can help businesses to maintain good relationships with their suppliers by making timely and accurate payments. This can help to strengthen the overall supply chain and encourage supplier loyalty

Who Uses EDI Payments?

EDI payments are used by a wide variety of businesses and organizations in many different industries. They are particularly common in industries where there is a large volume of transactions and where there is a need for fast and efficient payment processing, such as:


EDI payments are often used by manufacturers to pay for raw materials, supplies, and other goods and services.


Retail businesses often use EDI payments to pay for goods and services from suppliers and to process employee payroll payments.


EDI payments are frequently used in the healthcare industry to facilitate the exchange of payment information between healthcare providers and payers, such as insurance companies.


Many government agencies use EDI payments to facilitate the exchange of payment information with vendors and contractors.

Financial services

Financial institutions and other businesses in the financial services industry often use EDI payments to process transactions and transfer funds between parties.

EDI Payments - Industry

Difference Between EDI, ACH, and EFT

Often EDI (electronic data interchange), EFT (electronic funds transfer), and ACH (automated clearing house) are mistaken as similar processes, but they can be used together to facilitate the payment information and the payment. So, while EDI helps exchange bank details, payee names, and other important details, EFT is an act that protects consumer rights and defines the bank’s responsibilities to monitor electronic fund transfers. And ACH is a type of electronic payment under EFT that you can use to make a payment between banks


EDI (Electronic Data Interchange) is a standardized way of exchanging business data electronically between organizations. It is often used to facilitate transactions such as payments, invoicing, and orders.

One way that EDI is used for payments is by allowing organizations to send payment instructions and remittance information electronically, rather than through paper documents or manual data entry. This can help to streamline the payment process, reduce errors, and improve efficiency.

For example, a supplier may send an EDI invoice to a customer using an EDI format, such as an ANSI X12 810 Invoice. The customer can then process the invoice and generate a payment through their financial system using EDI. The payment can be sent to the supplier through EDI, along with any necessary remittance information, such as the payment amount and details of any deductions or adjustments.

EDI can also be used to automate the reconciliation of payments and invoices, as the payment and invoicing information is exchanged in a standardized format that can be easily processed by financial systems. This can help to reduce the time and effort required to reconcile payments and invoices, and can improve the accuracy of financial reporting.

Overall, the use of EDI for payments can help to improve the efficiency and accuracy of financial transactions between organizations


ACH is a network that facilitates the transfer of funds between financial institutions. ACH payments refer to the use of this network to process electronic payments, such as direct deposits, bill payments, and e-checks

An Automated Clearing House (ACH) is a payment system that processes electronic financial transactions in the United States. It is operated by the National Automated Clearing House Association (NACHA) and is used to facilitate the transfer of funds between banks and other financial institutions.

ACH transactions include direct deposit of payroll, Social Security, and pension payments, as well as electronic bill payments and other types of electronic payments. ACH transactions are typically faster and more secure than paper-based transactions, and they can be initiated by businesses, financial institutions, and individuals.

To initiate an ACH transaction, a sender provides the necessary information to their financial institution, including the recipient's name, bank account number, and routing number. The financial institution then sends the transaction to the ACH network, which processes the transaction and transfers the funds to the recipient's account.

ACH transactions are settled in batches, typically at the end of the business day. This means that the funds may not be available in the recipient's account until the next business day, depending on the timing of the transaction and the policies of the financial institutions involved.


EFT is a general term that refers to any electronic transfer of funds. This can include ACH payments, wire transfers, and other types of electronic payments

An electronic funds transfer (EFT) is a type of financial transaction that involves the transfer of funds from one bank account to another, typically through electronic means such as a computer or mobile device. EFTs can be used to transfer money between individuals or to make payments to businesses and organizations.

There are several types of EFTs, including:

  1. Automated Clearing House (ACH) transactions: ACH transactions are electronic payments that are processed through the National Automated Clearing House Association (NACHA). They include direct deposit of payroll, Social Security, and pension payments, as well as electronic bill payment and other types of electronic payments.
  2. Wire transfers: A wire transfer is a type of EFT that allows funds to be transferred between financial institutions in different locations. Wire transfers are typically used for large or time-sensitive transactions, as they are typically faster than ACH transactions.
  3. Electronic checks: An electronic check is a type of EFT that is initiated when a payer authorizes their financial institution to debit their account and transfer the funds to the payee's account. Electronic checks are often used for bill payment and other types of recurring payments.


Common EDI X12 Transactions Used in The Finance Industry


EDI X12 Transaction Number

EDI Transaction Name / Document Type

EDI 810


EDI 820

Payment Order/Remittance Advice

EDI 850

Purchase Order

EDI 856

Advance Ship Notice / Manifest

EDI 857

Shipment and Billing Notice

EDI 135

Student Loan Application

EDI 139

Student Loan Guarantee Result

EDI 144

Student Loan Transfer and Status Verification

EDI 146

Request for Student Educational Record (Transcript)

EDI 147

Response to Request for Student Educational Record (Transcript)

EDI 188

Educational Course Inventory

EDI 189

Application for Admission to Educational Institutions

EDI 190

Student Enrollment Verification

EDI 191

Student Loan Pre-Claims and Claims

EDI 194

Grant or Assistance Application


Frequently Asked Questions

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