What Are EDI Payments? How They Compare to ACH and EFT

If you've seen "EDI payment" on your bank statement or been told by a retailer that you need to support EDI payments, you're probably confused about what that actually means.

EDI payments aren't a payment method like ACH or wire transfers. EDI (Electronic Data Interchange) is the data format and transmission process that accompanies electronic payments, telling you what the payment is for, which invoices it covers, and how to apply it to your accounts.

ACH or EFT moves the money. EDI moves the information about that money: invoice numbers, purchase order references, payment amounts broken down by line item, and all the details your accounting team needs to reconcile payments without manually matching things up.

When retailers say they require "EDI payments," they really mean they'll send payment data in EDI format alongside the actual funds transfer. You need to be able to receive and process that data, or you'll spend hours manually figuring out which invoices each payment covers.

About Orderful

Orderful's EDI platform handles payment-related documents like EDI 810 invoices and EDI 820 remittance advice automatically, connecting your accounting systems with trading partners for accurate, traceable financial data exchange.

What is an EDI Payment?

EDI stands for Electronic Data Interchange, a structured method of exchanging business documents electronically using a standardized format (such as EDI format and other standardized formats) as the basis for consistent communication. This format ensures consistent, secure communication across different systems.

In the context of payments, EDI replaces paper-based invoices and payment details with digital records. These can include:

• Invoice numbers, POs, and customer IDs
• Bank account and routing information
• Payment amounts and due dates
• Check numbers or transaction identifiers
• Contact details for payer and payee
• Remittance information
• Purchase orders

Because everything is transmitted electronically, EDI enables direct exchange of payment data between payment data computers, streamlining the process. EDI reduces manual handling, minimizes errors, and increases data security.

What EDI Actually Does for Payments

When a company sends you a payment via ACH or wire transfer, you get money in your bank account. Great. But which invoices did that payment cover? Was there a deduction for a chargeback? Did they short-pay an invoice because of a shipping issue?

Without EDI, someone on your team opens the ACH file (if you're lucky) or calls the customer (if you're not) to figure out how to apply the payment. This takes time, creates errors, and delays your cash application.

With EDI payments, you receive an EDI 820 document (Payment Order/Remittance Advice) that breaks down:

• Which invoices this payment covers
• Exact amounts paid per invoice
• Any deductions or adjustments
• Reason codes for short payments
• Purchase order numbers and references
• Check numbers or transaction IDs

Your accounting system can automatically match this data to open invoices, apply the payment correctly, and flag any discrepancies for review. No manual detective work.

The Common EDI Payment Documents

A few EDI transaction sets handle most payment-related communication:

EDI 810 (Invoice): Your invoice to the customer, sent electronically instead of by email or mail. Contains line-item details, totals, payment terms, and all the information a traditional invoice includes.

EDI 820 (Payment Order/Remittance Advice): The customer's notification that they've paid you, including exactly what they paid and why. This is what people usually mean by "EDI payment."

EDI 812 (Credit/Debit Adjustment): Documents adjustments to previous invoices or payments like chargebacks, allowances, and pricing corrections.

EDI 828 (Debit Authorization): Confirms that you've authorized the customer to debit your account (used in some automated payment arrangements).

These documents don't move money. They move the data that explains what's happening with the money moving through ACH, wire, or other payment rails.

For more EDI transaction examples, check out the Target EDI transactions Orderful supports.

How EDI Payments Actually Work

Let's follow a realistic scenario:

Your company sells products to a major retailer. You ship an order worth $50,000.

Without EDI:

1. You email a PDF invoice
2. Retailer receives it, manually enters it into their system
3. Two weeks later, $48,500 shows up in your bank account via ACH
4. You have no idea which invoices were paid or why you're short $1,500
5. Someone calls the retailer's AP department and waits on hold
6. Eventually you discover there was a $1,500 chargeback for a compliance issue
7. You manually apply the payment and adjustment after 30+ minutes of work

With EDI:

1. You send an EDI 810 invoice electronically
2. Retailer's system receives it automatically
3. Two weeks later, you receive an EDI 820 showing payment of $48,500
4. The EDI 820 breaks down: $50,000 invoice minus $1,500 chargeback for late shipment
5. Your system automatically applies $48,500 to the invoice and flags the $1,500 deduction
6. Total time spent: under 2 minutes reviewing the flagged chargeback

EDI doesn't change how money moves (still ACH), but it makes the data flow automatic and accurate.

Web EDI vs. Direct EDI for Payments

You have two main options for handling EDI payments:

Web EDI

You log into a web portal (like logging into your bank website) and manually view/download EDI payment documents. You can see which invoices were paid, download remittance data, and manually enter it into your accounting system if needed.

Good for small businesses with low payment volumes, companies just starting with EDI, and situations where full automation isn't justified by volume.

Still involves some manual work, but way better than phone calls and guesswork.

Direct EDI (Integrated)

EDI payment documents flow automatically between your accounting/ERP system and your trading partners. When a payment comes in, the EDI 820 automatically updates your AR, applies payments to invoices, and flags any discrepancies.

Good for higher payment volumes, companies wanting full automation, and businesses processing dozens or hundreds of payments monthly.

Requires initial setup and integration, but pays for itself quickly in time saved.

Most businesses start with Web EDI and move to integrated EDI as payment volumes grow.

Why Retailers Require EDI Payments

If you sell to major retailers, they'll eventually require you to support EDI payments.

Scale: Walmart processes millions of invoices annually. They can't have suppliers emailing PDFs or calling to clarify payments. EDI lets them automate the entire payables process.

Accuracy: Automated data exchange means fewer errors than humans retyping information from paper or PDF invoices.

Speed: EDI invoices process faster than mailed paper or emailed PDFs that sit in inboxes. Faster processing means faster payment.

Traceability: Every EDI document has a trail. If there's a dispute three months later, both parties have electronic records of exactly what was sent, when, and what it said.

Compliance: Retailers can enforce compliance through the EDI connection. Late shipment? Incorrect labeling? The chargeback shows up automatically in your EDI 820 with the reason code.

From the retailer's perspective, EDI payments aren't optional. They're how their systems work. If you can't send EDI invoices and receive EDI remittance advice, you create manual exceptions that cost them time and money.

EDI Payments vs. ACH vs. EFT (Explained Simply)

People constantly confuse these terms. The actual difference:

EFT (Electronic Funds Transfer): The broad umbrella term for any electronic money movement. This includes ACH, wire transfers, credit card payments, debit card transactions, PayPal, Venmo. Basically anything that's not cash or a physical check.

ACH (Automated Clearing House): A specific type of EFT used for batch-processed transactions like direct deposit, bill payments, and B2B payments. Most business-to-business payments in the US move via ACH because it's cheap, reliable, and standardized.

EDI: Not a payment method at all. EDI is the data format for transmitting payment information (and invoices, purchase orders, shipping notices, etc.) electronically. EDI often accompanies ACH payments to provide the remittance data.

In practice: Your customer pays you $100,000 via ACH (the payment method). They send an EDI 820 telling you that $100,000 covers five specific invoices with exact breakdowns (the payment data).

EDI and ACH work together constantly in B2B payments. ACH moves the money, EDI explains what that money is for.

What Makes EDI Payments Different

EDI payments are not actually payments. Worth repeating because it's the most common confusion. EDI provides the data about payments. The actual money still moves through ACH, wire, check, or whatever payment method you're using.

They require setup. You can't just "turn on" EDI payments like you activate Venmo. You need EDI software, you need to connect with your trading partners, and you need your systems configured to send and receive the right documents.

They're tied to specific transaction sets. You don't send free-form payment data. You send structured EDI 810 invoices and receive structured EDI 820 remittance advice that follow specific formats with designated fields.

They're mostly B2B. Consumers don't use EDI. When you pay your electric bill online, that's not EDI. It's a direct consumer payment through the utility's website. EDI is for business-to-business transactions where both parties need detailed, automated data exchange.

They solve the reconciliation problem. The main value of EDI payments isn't speed (ACH is already pretty fast). It's accuracy and automation in matching payments to invoices without manual work.

The Cash Flow Benefit Nobody Talks About

EDI payments speed up cash application, which directly improves cash flow. Not for the reason most articles claim.

It's not that the money arrives faster (payment speed is determined by ACH timing or wire transfers, not EDI). It's that you can use the money faster because you know exactly what it's for.

When a $250,000 ACH payment hits your account and you don't have EDI remittance data, what happens? Someone needs to figure out which invoices it covers before your accounting system shows those receivables as paid. Until then, the money sits there but your books don't reflect it. Your AR aging is wrong. Your available credit line calculations are off. Your cash flow reports are inaccurate.

With EDI 820 data arriving alongside (or just before) the ACH payment, your system automatically reconciles everything. Your books are accurate immediately. You know your true cash position. You can make decisions based on real data instead of waiting for manual reconciliation.

For high-volume businesses, this matters. The difference between knowing your cash position today versus three days from now can determine whether you take advantage of supplier discounts, whether you need to tap a credit line, or whether you can fund growth initiatives.

Common EDI Payment Headaches

The Data Doesn't Match

You receive an EDI 820 saying they paid invoice #12345 for $10,000. Your records show invoice #12345 was for $10,500. Now you need to figure out the discrepancy. Did they take a discount? Was there a chargeback? Data mismatch issues come up constantly, especially during initial EDI implementation.

Partners Use Different Formats

Not all EDI is created equal. Different retailers have slightly different requirements for what goes in an EDI 810 invoice or how they structure their EDI 820 remittance advice. You might need custom mapping for each major trading partner.

Integration Complexity

Getting EDI payment data into your accounting system isn't always straightforward. Some ERPs have built-in EDI capabilities. Others require middleware or custom integration work. Budget time and money for this.

Timing Issues

Sometimes the EDI 820 arrives before the ACH payment hits your bank. Sometimes it arrives after. Your systems need to handle both scenarios and match them up correctly.

Chargebacks and Deductions

Retailers love taking deductions for compliance violations, late deliveries, or damaged goods. These show up in your EDI 820, and you need processes to dispute them when they're wrong or accept them when they're legitimate.

Security in EDI Payments

EDI payment data contains sensitive information: bank account numbers, payment amounts, customer IDs. Security matters.

Encryption: EDI transmissions use SSL/TLS encryption so data can't be intercepted and read in transit.

VANs (Value-Added Networks): Many companies route EDI through third-party VANs that provide additional security layers, though modern cloud-based EDI platforms often eliminate the need for expensive VANs.

Authentication: Systems verify that documents actually come from your trading partner, not a spoofed sender.

Audit trails: Every EDI transmission gets logged with timestamps, sender/receiver info, and document contents for compliance and dispute resolution.

EDI is generally more secure than emailing PDF invoices or sending payment information through regular email, where data sits unencrypted in inboxes and can be forwarded or intercepted easily.

Do You Actually Need EDI Payments?

Not every business needs EDI. When it makes sense:

You sell to major retailers. Walmart, Target, Amazon, most large retail chains require EDI. Non-negotiable.

You process high payment volumes. If you're reconciling dozens of payments weekly, EDI automation saves significant time.

Payment matching is painful. If your team spends hours matching incoming payments to invoices, EDI solves that.

Accuracy matters for compliance. Industries with strict record-keeping requirements (healthcare, government contracting) benefit from EDI's built-in audit trails.

You're scaling. Manual payment processing doesn't scale. EDI does.

You don't need EDI if you're a small business with a handful of customers who pay predictably, you have simple invoicing needs, or your customers don't require it.

Getting Started With EDI Payments

If you've determined you need EDI payments, the realistic path forward:

1. Understand requirements. Get the EDI implementation guide from your trading partner (the retailer or customer requiring EDI). This tells you exactly which documents they need and in what format.

2. Choose your approach. Web EDI for simple, low-volume needs. Integrated EDI if you're processing significant payment volumes and want automation.

3. Select an EDI provider. Don't try to build this yourself unless you're a huge enterprise with dedicated developers. Use a modern EDI platform that handles the technical complexity.

4. Test thoroughly. Send test EDI 810 invoices, receive test EDI 820 remittance advice, make sure everything maps correctly before going live.

5. Train your team. Your accounting folks need to understand how to read EDI payment data, how to handle exceptions, and how to dispute incorrect chargebacks.

6. Monitor and adjust. Watch for patterns in errors or deductions. Fix root causes instead of just correcting individual issues.

Most businesses can implement Web EDI in days. Integrated EDI typically takes 2-4 weeks depending on your systems.

How Orderful Handles EDI Payments

Orderful's platform processes EDI payment documents (810 invoices, 820 remittance advice, 812 adjustments) alongside your other EDI transactions. Instead of treating payments as a separate thing requiring separate setup, we handle them as part of your overall EDI connection with trading partners.

You send EDI 810 invoices through the same platform you use for EDI 856 advance ship notices. You receive EDI 820 payment data through the same connection that brings in EDI 850 purchase orders. Everything flows through one system, with validation built in to catch errors before they cause problems.

Talk to our team about setting up EDI payments that actually work with your accounting systems.

EDI Payment Frequently Asked Questions

What is an EDI payment?

An EDI payment isn't actually a payment method. It's the electronic data that accompanies electronic payments explaining what the payment covers. When a customer sends payment via ACH or wire, they send an EDI 820 document detailing which invoices that payment covers, exact amounts paid, and any deductions or adjustments. This allows your accounting system to automatically apply payments to the correct invoices without manual matching.

How do EDI payments work?

EDI payments work by exchanging structured payment data between trading partners' computer systems. You send an EDI 810 electronic invoice to your customer. When they pay (usually via ACH), they send back an EDI 820 remittance advice showing exactly what that payment covers: which invoices, amounts, deductions, and references. Your system matches the EDI 820 to your open invoices and applies the payment automatically.

What is the difference between EDI payment and ACH payment?

ACH (Automated Clearing House) is the actual payment method that moves money between bank accounts. EDI (Electronic Data Interchange) is the data format that explains what an ACH payment is for. Most B2B ACH payments include EDI remittance data (EDI 820) so the recipient knows which invoices are being paid. You can have ACH without EDI (just money with no details) or EDI without ACH (invoice data without immediate payment), but they usually work together.

Is an EDI payment the same as EFT?

No. EFT (Electronic Funds Transfer) is a broad term for any electronic money movement including ACH, wire transfers, credit cards, and direct deposits. EDI (Electronic Data Interchange) is the structured data format that accompanies B2B payments to provide invoice details and remittance information. An EFT moves the money, EDI explains what that money is for.

Why do retailers require EDI payments?

Major retailers require EDI because they process millions of invoices annually and can't handle manual payment matching. EDI invoices (EDI 810) and payment remittance (EDI 820) allow complete automation of their accounts payable process. EDI also provides compliance enforcement. Chargebacks for late deliveries or labeling violations show up automatically in remittance data with reason codes, making suppliers accountable without manual intervention.

Do I need special software for EDI payments?

Yes, you need EDI software to send and receive EDI payment documents. Options include Web EDI (browser-based portal where you manually process documents), integrated EDI (connects directly to your ERP or accounting system for automation), or managed EDI services where a provider handles the technical details. Most businesses start with Web EDI and upgrade to integrated solutions as payment volumes increase.

How secure are EDI payments?

EDI payments are generally more secure than emailing invoices and payment information. EDI uses encryption (SSL/TLS) to protect data in transit, authentication to verify sender identity, and audit trails logging every transmission. Many EDI systems route through secure VANs (Value-Added Networks) or modern cloud platforms with additional security layers. EDI payment data is structured and validated, reducing fraud risk compared to unstructured email attachments.

Can small businesses use EDI payments?

Yes, small businesses can use EDI payments through Web EDI platforms that don't require technical expertise or expensive infrastructure. Web EDI costs typically start around $189/month per trading partner and requires no IT staff or system integration. If you sell to retailers requiring EDI, Web EDI is the most accessible entry point for small businesses with limited transaction volumes.