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EDI Billing

Understanding the Basics of EDI

Understanding the Basics of EDI

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What is EDI Billing?

The process of sending invoices using EDI is often referred to as EDI Billing. The other term often used in conjunction with EDI billing is 810. 810 is simply the transaction code as prescribed by the ANSI X12 standard that indicates an invoice, or an EDI billing transaction. EDI billing is one of the two most frequent uses for EDI, with its counterpart, EDI purchasing being the other. Many trading partners will require only EDI billing and purchasing as mandatory EDI transactions, especially when dealing with smaller vendors.

Benefits of EDI Billing

There are numerous explanations as to the origins and drivers for the adoption of EDI, especially EDI billing. One of the biggest drivers for the adoption of EDI billing however was the need for the automotive industry to implement "just-in-time" order processing and inventory management to remain competitive. With EDI billing the process of creating and sending an invoice to a customer becomes automated and can significantly reduce costs vs. paper-based systems.

How EDI Billing Works

To understand EDI billing, consider a paper transaction where you receive a purchase order and in turn generate an invoice for the products ordered:

  1. You receive a printed purchase order
  2. You ship the products requested and print an invoice
  3. You send the invoice to the customer via US Mail
  4. The customer receives the invoices

The biggest challenge with such a manual system is that of time - specifically the time wasted waiting for the various steps to be performed. Now lets look at the same process in an EDI billing environment:

  1. Your customer sends you an EDI 850 purchase order
  2. Your EDI software sends the EDI purchase order into your ERP system instantaneously
  3. You ship the products and generate an invoice
  4. Your EDI software takes the ERP invoice and creates an EDI billing transaction
  5. The EDI invoice is sent to your customer

The process as you can see is nearly identical, with the biggest advantage of EDI billing being the time savings involved. The entire purchase order to EDI billing cycle can take place in mere seconds.

EDI Billing and Doc-Turns

In many instances, manufacturers know that transactions they receive from specific customers will always be billed in full—meaning the EDI billing transaction will be identical to the purchase order, with no partial shipments. In such instances, it's often useful to create what is known as a "doc-turn". A doc-turn is simply a process in your EDI software that takes a purchase order, generates an EDI billing transaction and immediately sends the EDI billing invoice to the customer saving more time in the process.

EDI Billing for Your Business

Just about every EDI software available can perform EDI billing. The challenge however is to ensure that the software you select can perform EDI billing transactions quickly and smoothly. When selecting your software for EDI billing, you should inquire as to the software's ability to implement features like Doc-Turns or other automation steps that would make the EDI billing process faster and more accurate. 

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