EDI X12 820 Payment Order/Remittance Advice (or simply EDI 820), sometimes called as EDI payment, is an electronic document transmitted via EDI (Electronic Data Interchange) that business partners (seller, buyer, financial institution…) use to provide detailed payment information. Normally an EDI 820 transaction, is sent by the buyer to his supplier after issuing a payment against an EDI 810 Invoice sent by the supplier.
In North America, the Payment Order/Remittance Advice transaction set is transmitted in EDI X12 standard. The message code in EDIFACT standard for the Remittance advice message is REMADV.
REMADV is the analog of EDI 820; it has the same function and application in international business practice, mainly in Europe.
Unlike typical EDI transactions exchange between two trading partners, banks and financial institutions are also involved in the exchange of EDI 820.
Moreover, EDI 820 transaction set can be used for various purposes:
Simultaneously to make a payment and send remittance advice (sent through your bank to trading partner)
In this case, all Remittance Advice details and the Payment Order will be transferred to your financial institution (bank). The bank will then forward Remittance details to your trading partner and debit your account in favor of your trading partner.
To send remittance advice only (sent directly to your Trading Partner, payment is made independently)
If you use this option, you must make payment to your trading partner in separate transaction. This transaction must match the total amount specified in the EDI 820 detail transmission. Normally, the trading partner accepts payment details referencing invoice numbers only.
Remittance Advice can be sent directly from the payer to the recipient, through a financial institution, or a third-party agent.
To make an EDI payment (sent through your bank to trading partner)
In this case, the payment order will be transferred to the bank and the bank will forward the file to your trading partner and debit your account in favor of this trading partner. Thus, EDI 820 can act as an instruction for a financial institution to make a payment to the beneficiary.
It should be noted that usually trading partners also require the details to be sent in EDI format.
Some companies may still accept non-EDI remittance advice, however, data sent by email, fax, or paper will incur additional manual processing fees for each transaction.
As mentioned above, Payment Order/Remittance Advice document contains all important information related to the financial transactions. The EDI 820 document contains the following basic information:
- Payer / Beneficiary identification (name, address details)
- Invoice number(s)
- Bank and account information
- Invoice adjustments (if applicable)
- Payment amount
- Payment/remittance date
- Method of payment/funds movement
- Credit /debit confirmation
- Check /payment number
There are several different ways to exchange an EDI 820 document. The main communication protocol to transfer EDI documents are:
- Connection with VAN (Value Added Networks). VAN is the third party in the EDI exchange process that transmits and stores data in an electronic mailbox until it is received by one of the business partners.
Point-to-point EDI exchange:
- FTP/SFTP – File Transfer Protocol/Secure File Transfer Protocol. These file transfer protocols allow trading partners to connect with each other via the Internet to exchange EDI documents.
- AS2 – A secure way to exchange documents electronically over the Internet by using digital certificates and encryption of the EDI data.
- HTTP (REST) where data is transferred using content type “multi-part/form data”
Each one of the above communication protocols, has its advantages, however, each company must decide what best fits its policy, based on the requirements of its business partner or the business processes of the company.
To learn more about EDI Communication Protocols read our article: All about EDI: 11 Complete Answers about Electronic Data Interchange
Payment Order/Remittance Advice like any other EDI document has a structure of segments and elements predefined by the X12 standard. Some of them are mandatory, some are optional. It all depends on how this EDI 820 document will be used and the specifications requested by the trading partner.
The structure of EDI 820 could be as follow:
ISA – Interchange Control Set Header (Mandatory)
GS – Functional Group Header (Mandatory)
ST – Transaction Set Header (Mandatory)
BPR – Beginning Segment for Payment Order / Remittance Advice (Mandatory)
TRN – Trace (Mandatory)
CUR – Currency (Mandatory)
REF – Reference Numbers (Mandatory)
DTM – Date / Time Reference (Optional)
N1 – Name (Mandatory)
N3 – Address Information (Optional)
N4 – Geographic Location (Optional)
PER – Administrative Communication Contact (Optional)
ENT – Entity (Optional)
RMR – Remittance Advice Accounts Receivable Open Item Reference (Mandatory)
REF – Reference Numbers (Optional)
DTM – Date / Time Reference (Optional)
ADX – Adjustment (Optional)
SE – Transaction Set Trailer (Mandatory)
GE – Functional Group Trailer (Mandatory)
IEA – Interchange Control Trailer (Mandatory)
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