An EDI 820, also known as a Payment or Order Remittance Advice is a type of Electronic Data Interchange (EDI) document used in the exchange of transaction information between trading partners. The EDI 820 is based on the Accredited Standards Committee (ASC) X12 format, as defined by the American National Standards Institute (ANSI), the governing body that controls EDI formats in the US.
EDI 820 in the EDI Communication Process
An EDI 820 is typically issued by a buyer after the receipt of an EDI 850 document (Invoice). In layman's terms an EDI 820 is equivalent to sending your supplier a notice of intent to pay an invoice. Like other EDI documents, the EDI 820 must be generated through a specialized application (the EDI translator) and then sent to the recipient through some electronic means. The sender's computer will typically perform the translation of the EDI 820 into an EDI format, while the communication will take place either through an Internet EDI connection or through a Value Added Network (VAN).
Transmitting the EDI 820
Once the EDI 820 is ready to be sent to the recipient, one of two methods are going to be generally used. The first, and still most popular method, is the use of a VAN. A VAN acts as an intermediary between the two parties, facilitating the communication of the EDI 820 (and other EDI documents). In this manner the VAN is very similar in scope to the US postal service. Beyond simple delivery though, the VAN is also responsible for ensuring that the transmission is secure throughout the entire process. This is always of paramount importance, but even more so with documents like the EDI 820 that may include bank account numbers, invoice numbers etc. A second option that is growing in popularity is the use of a direct connection through the Internet to exchange the EDI 820 between two parties. This second form of communication is also known as AS2 communication. When using AS2 to send the EDI 820, the document is encrypted at the source and sent using secure internet-based protocols to the recipient which then must have software capable of decrypting the EDI 820 prior to translation.
Translating the EDI 820
Once an EDI 820 is received the first step must be translation of the document. An EDI 820, like any EDI document, in its native format is not meant to be read by a human operator. In the translation process the EDI 820 will be converted into one of two forms - a "human readable" format - usually in the form of a report that is printed to a physical printer, or (more likely) into a file format that is easily imported into an accounting or ERP system. The translation of the EDI 820 into this more easily integrated format is the first key step in the reception of the EDI 820 before it can be used by the intended recipient.
Integrating the EDI 820 Into Your Business
Once the EDI 820 is translated into a computer ready format, a secondary in-house process takes the new file with the information that originated in the EDI 820 and moves it into the recipient's ERP or accounting system. At this stage of the transformation the EDI 820 is now a document that can be identified and used by the recipient as the sender of the EDI 820 intended.