If you’ve heard the term “EDI payments,” you may be wondering what this means—and how it affects your business.
EDI is the leading technology for transmitting business documents. And while you can send and receive accounting information through EDI, it’s not a simple matter of running payments through EDI.
Here’s everything you need to know.
What are EDI payments?
The term “EDI payments” is actually a little misleading. Believe it or not, it’s impossible to process payments through EDI technology!
True payments require some form of EFT (electronic funds transfer). Among our EDI clients, common EFT payment methods include credit/debit card transactions, ACH (automated clearinghouse), and wire transfers.
But that doesn’t mean EDI has nothing to do with payments.
If EDI isn’t a payment method, where does it fit in the accounting process?
A payment isn’t much good if you don’t know where to apply it in the books. Who sent the payment, why they sent it, what they purchased—these are essential things to know.
This is where EDI comes in. The technology can process the documents associated with payments—for example, invoices, remittance advice, credit adjustments, and so on.
Think of it like this:
- Actual payments are handled through EFT.
- Documents associated with payments can be handled through EDI.
Is EDI essential in the accounting process?
Technically, no. Plenty of smaller companies send and receive financial documents through snail mail, email, or other non-automated means.
However, if your trading partners require you to be EDI capable, then you have to use EDI. This technology is the de facto standard for business documents in numerous industries. In fact, our clients rely heavily on EDI for payment-related communication.
In other words, if you want to work with a wide range of trading partners, you’ll need EDI to send and receive documents related to payments.
Benefits of EDI for payment documents
When it comes to transmitting business documents, EDI offers significant benefits over methods like snail mail and email. Here’s what our clients get with EDI.
- Greater efficiency. EDI systems are typically fully integrated, all the way from the trading partner through to your backend system. Documents can literally be generated, sent, and processed hands-free in both directions. This means you don’t waste resources with human data entry for payment-related documents.
- Greater accuracy. There’s no way around it: People can make mistakes when rekeying data in another system. Since EDI is fully automated, everything just flows as it’s supposed to—provided you have a great EDI services partner keeping your systems running.
- Better customer experience. EDI makes you easier to do business with for trading partners who rely on EDI. When you conform to their standards, you take out friction and pave the way for becoming a preferred supplier.
- Greater potential market exposure. Since EDI is the #1 way of transmitting business documents, becoming EDI capable empowers you to work with larger trading partners, expanding your market reach.
Common EDI payment documents
How many processes can EDI cover in accounting?
Quite a few, actually. Here are some common financial documents that our clients use in the ANSI X12 standard.
- Invoice (810)
- Consolidated service invoice/statement (811)
- Credit/debit adjustment (812)
- Joint interest billing and operating expense statement (819)
- Remittance advice (820)
- Financial information reporting (821)
- Account analysis (822)
- Financial return notice (827)
- Debit authorization (828)
- Payment cancelation request (829)
How do you succeed with EDI for payment-related documents?
EDI is a complex technology that requires its own systems and software. But it’s not enough to just buy an EDI solution. Here’s what it takes—and what our clients get from us.
People
EDI systems can’t run themselves. Because they’re complicated and deeply integrated to other systems, they require dedicated support resources.
Global enterprises can hire EDI experts in-house. They have the funds, and they can justify the expense because they process EDI payment documents on a global scale.
It’s harder for midmarket companies to justify in-house hiring. An EDI service provider typically makes more sense. The challenge, though, is to find one who offers unmetered service for one predictable monthly price—as we do here at Corsica.
Process
Any time you’re dealing with complexity, you need structure around those operations. EDI is no different. You want expert resources who not only know the technology but know how to support the technology.
Here at Corsica, we’ve refined our processes in 30+ years’ experience. We know EDI inside and out, especially when it comes to payment documents.
Technology
You can’t process EDI payment documents without an EDI solution. That’s why we advise every client on the right-fit solution for them—ensuring they balance complexity with functionality and flexibility. From scoping to implementation to support, we’ve got the technology covered.
Moving forward with EDI payment documents
Ready to process payment-related documents through EDI? Download our guide on How To Become EDI Capable. We’ll show you exactly what it takes to run better with EDI.
Hint: It’s easier than you might think.
Need to become EDI capable?
Download our FREE guide to launching EDI.
