EDI payments explained (and why modern finance teams use simpler solutions)
EDI payments explained as a data standard, how they differ from ACH and wires, and why modern AP uses simpler automated workflows for remittance.
Rho Editorial Team
If you work with large retailers, manufacturers, or healthcare networks, you have probably heard the phrase EDI payments. In practice, electronic data interchange describes a standardized format for business documents such as invoices, purchase orders, and payment remittance advice. The format helps trading partners’ ERPs talk to each other at scale.
The confusion comes from assuming EDI moves money—but it doesn’t. Funds move on payment rails such as ACH, wire, card, or other electronic funds transfer methods. EDI can ride alongside those rails to carry payment information like invoice numbers and discounts so accounts receivable can auto-apply cash.
Most startups do not need a full EDI system to pay vendors on time. If no partner mandates EDI, paying by ACH or wire from an accounts payable platform with approvals, vendor onboarding, and clear remittance data is usually faster and less costly. In this guide, we break down what EDI is, where it is required, and how modern teams use simpler workflows while keeping cash flow and reconciliation clean.
EDI vs “EDI payments”: What the term actually means
Teams hear “EDI payments” and often assume a new way to move money. In reality, electronic data interchange is a data standard for business documents, not a payment rail.
EDI in plain terms
Electronic data interchange is a standardized format and transport for business documents. Common standards include ANSI X12 and EDIFACT. Typical EDI transactions include the 810 invoice, 850 purchase order, 855 purchase order acknowledgment, 856 advance ship notice, and 820 payment order or remittance advice. The benefit is consistent payment information and fewer paper documents across trading partners.
What people usually mean by “EDI payments”
Most teams use the phrase to describe a payment that includes structured remittance advice formatted in EDI, most often the EDI 820. On ACH, that remittance can ride as CTX when the full 820 sits in the addenda records, or as CCD+ when a single reference appears in one addenda record. The EDI file helps accounts receivable match the payment to invoice numbers and credits while the rail moves the money.
Who is in the loop
Buyer accounts payable and supplier accounts receivable coordinate with ERPs and service providers. Banks and other financial institutions exchange files over transports such as AS2, SFTP, or a value added network. Trading partners agree on the EDI format, mappings, and acknowledgments before going live.
Where you see this used
Large supply chains, distributors, retail, manufacturing, and healthcare rely on EDI to move high volumes of business transactions. Connections can be direct EDI between partners or web EDI through a hosted portal.
How the EDI payment process works
1 - Start in the ERP
First, create the invoice with an invoice number and amounts, convert it to an EDI file (ANSI X12 or EDIFACT, often an EDI 810), and send it over AS2, SFTP, or a value added network.
2 - Schedule settlement on a rail
Next, use ACH payments on the Automated Clearing House, wire transfers for urgent or cross-border, or another EFT method.
Generate an EDI 820 payment order and remittance advice with invoice numbers, amounts, discounts, credit memo references, and payment instructions.
3 - Move funds and reconcile
That’s it—banks move funds on the rail. Remittance travels with or alongside the payment. On ACH, use CTX for full 820 addenda or CCD+ for a single reference. AR auto-applies cash and both sides reconcile in the ERP.
Types of EDI payment documents you’ll hear about
EDI 820 payment order and remittance advice
The EDI 820 carries structured payment information that tells a supplier how to apply a receipt. It lists invoice numbers, amounts, discounts, credit memo references, and payment instructions so accounts receivable can auto-apply cash without manual data entry.
On ACH payments through the automated clearing house, the 820 typically rides as CTX with full remittance in addenda records or as CCD+ with a single addenda reference. Banks and other financial institutions transmit the file to the supplier over AS2, SFTP, or a value added network after the payment is scheduled.
For an authoritative reference on the 820 format, see X12’s Payment Order/Remittance Advice overview.
Related transaction sets in the payment process
Use these common EDI messages alongside the 820 to keep AP, AR, and the ERP in sync:
810 invoice reflects what the supplier bills and becomes the source for payment data in accounts payable.
850 purchase order confirms quantities and pricing from the buyer to the supplier.
855 purchase order acknowledgment confirms acceptance or changes before shipment.
856 advance ship notice shares shipment details so receiving and three-way matching run smoothly.
Direct EDI vs web EDI
Direct EDI is a point-to-point connection between trading partners that requires mapping, testing, and ongoing maintenance for each relationship. It fits high-volume business-to-business flows where both sides already operate an EDI system.
Web EDI is a hosted portal or service provider model that handles translation and transport for you, which suits teams that need to exchange a few EDI transactions such as the 810 and 820 with large customers but prefer lighter setup.
In both cases EDI carries payment information, while the transfer of funds still happens on a rail such as ACH, a wire transfer, or another EFT method.
EDI vs ACH, EFT, and wires (what actually moves money)
EDI is about payment information. ACH, wires, and cards are about moving cash. Use EDI for structured remittance advice and use a payment rail to settle funds.
How the ACH network works
ACH is an electronic funds transfer network that batches domestic payments. Nacha sets the operating rules, file formats, and addenda standards. Typical ACH transactions include bill pay and direct deposit. For vendor payments, the bank uses your company bank account and the supplier’s bank account to settle. When you need to include remittance information, ACH supports CCD+ with a single addenda reference or CTX with full EDI 820 details.
For how remittance travels on ACH (CCD+ versus CTX addenda), see Nacha’s ACH Guide for Developers.
Wire transfers
Wires move funds in near real time for urgent or high-value payments and for many cross-border payments. Setup is lighter than EDI because you only need verified vendor bank account details. Fees are higher, but settlement speed and finality are the draw.
Credit card and debit card
Some suppliers accept cards for flexibility or to speed collections. Cards carry interchange costs but add controls, dispute workflows, and detailed line-item data. They do not require EDI, although you can still share remittance advice separately.
What each option actually does
Topic | EDI | ACH or other EFT | Wire transfer | Card |
Scope | Payment information standard for business documents and remittance advice | Transfer of funds on the automated clearing house network | Transfer of funds from bank to bank, typically same day | Electronic payment on a card network |
Setup | Mapping, testing, and integrators, plus transport such as AS2, SFTP, or a VAN | Bank account and vendor bank account details, ACH permissions under the Nacha rules | Beneficiary instructions and verification | Merchant acceptance and card controls |
Typical use | High-volume business-to-business transactions that need structured data | Domestic accounts payable runs and payroll | Time-sensitive or cross-border payments | Suppliers that accept cards for speed or flexibility |
Cost and complexity | Additional tooling and maintenance per trading partner | Low cost and batch-friendly | Higher fees, faster settlement | Interchange fees, strong controls |
Reconciliation | Carries detailed remittance advice such as EDI 820 | Addenda fields support invoice references or full CTX detail | Remittance shared by advice, portal, or file | Statement data plus separate remittance if required |
Modern AP platforms can embed remittance information with ACH, wire, or card payments, so finance teams get clean reconciliation without standing up a full EDI system.
Benefits of EDI payments, tradeoffs, and when it makes sense
EDI brings structure to payment data. An EDI 820 carries rich remittance advice that AR systems can read without manual entry, so invoices, discounts, and credits match automatically.
At scale, this reduces paper-based errors, speeds processing, and improves cash flow visibility. Large networks—retail, supply chain, healthcare—depend on it to keep high volumes of financial transactions oving consistently across business partners.
Timing, common risks, and where manual work shows up
But even though EDI reduces paper errors and speeds processing at scale, the gains come with tradeoffs.
Setup and maintenance — every trading partner needs mapping and testing, and mappings must be updated whenever formats change.
Onboarding hurdles — vendor bank account validation and partner testing add friction.
Exception handling — file validation errors or missing fields lead to delays and manual work.
Timing and reconciliation — ACH cutoff times, incomplete CTX or CCD+ addenda, or remittance arriving in the wrong channel can all slow reconciliation.
When to keep EDI
Because of these costs, EDI usually only makes sense when a large customer or regulator requires it.
For example in retail, multi-party supply chains, or healthcare remittance flows.
For most other teams, modern AP tools deliver the same benefits with less complexity.
The modern approach: Skip EDI with automation
For most finance teams, AP automation covers everything they need without the overhead of a full EDI stack. If no trading partner mandates EDI, you can pay vendors by ACH or wire directly from your AP platform. Including structured remittance advice lets AR auto-apply cash just as easily.
A single platform for vendor onboarding, approvals, and payments reduces duplicate steps, speeds reconciliation, and provides real-time visibility into cash flow. In practice, this is usually enough:
A small vendor set can accept ACH with CCD+ or CTX addenda.
Automation already handles approvals, onboarding, and remittance.
Real-time status and one system of record matter more than maintaining a separate EDI system.
What to run in your AP platform:
Schedule ACH and wire payments in one workflow.
Route approvals by threshold, department, or vendor.
Collect W-9s and verify vendor bank details during onboarding.
Send invoice numbers, amounts, and credits in remittance fields so AR auto-applies cash.
Track payment status with a full audit trail.
Why finance teams choose Rho over EDI complexity
If your goal is to move money on time and keep clean records, we bring ACH payments, wires, checks, and card into one bill pay workflow. You approve, pay, and reconcile in the same place with real-time status and a full audit trail.
At Rho, we help finance teams skip EDI-first detours. Instead of standing up a separate EDI system, you schedule ACH or wires, include the remittance details vendors need, and keep approvals and vendor onboarding in one payment system. When a partner asks for EDI 820, you send the same data alongside the payment and keep funds movement in Rho.
What you can do with our platform
Schedule ACH, wires, checks, and card payments with approvals and bill locks.
Onboard vendors with W-9s, verified bank details, and name/account checks.
Include invoice numbers, amounts, discounts, and credits in remittance advice.
Sync vendors, bills, payments, and attachments to your ERP with a full audit trail.
When a partner asks for EDI
Add invoice identifiers in ACH addenda for CCD+, or send full remittance in CTX where supported.
Attach a structured remittance file or PDF with the payment notification, or upload to a vendor portal.
Keep funds movement on ACH or wire inside our platform, and treat EDI as the format for remittance data.
Make payments simpler and keep optionality with Rho
Remember: EDI carries payment details. ACH, wires, and cards move the money. When a partner asks for EDI remittance, you can still pay by ACH or wire and include the details they need.
Most finance teams can run accounts payable with modern approvals, vendor onboarding, and clear remittance in one payment system. That approach cuts extra tools and maintenance while improving cash flow visibility and close speed.
Get started with Rho for simpler approvals, faster settlements, and clearer cash flow.
Summary and more FAQs about EDI payments
What are EDI payments, and how do they differ from ACH payments and EFT payments?
EDI payments refer to sending standardized payment information using electronic data interchange, usually so a supplier can auto-apply cash to invoices. ACH and other EFT payments are the rails that actually move money to a bank account. Most business-to-business payments ride the Automated Clearing House Network, an electronic funds transfer rail operated under Nacha rules.
Do I need EDI to pay vendors, or can I use ACH via my AP platform?
You can pay vendors by ACH from your AP platform without standing up a separate EDI system. Your bank or service provider can include payment information and payment details in the ACH addenda so suppliers can post cash without a separate EDI system.
What is EDI 820, and when would I use EDI payments with it?
EDI 820 is the payment order and remittance advice document that lists invoice numbers, amounts, discounts, and payment instructions. Teams use it when a trading partner asks for structured remittance information alongside an ACH or wire. The 820 payment order can be transmitted by a financial institution, an ERP connector, or a value added network, depending on the trading partners.
How do I send remittance advice without EDI?
Include the invoice number or a reference in ACH addenda fields, send a structured remittance file or PDF with the payment notification, or upload the file to a supplier portal if requested. This approach replaces paper checks and paper-based remittance files while avoiding manual data entry on the supplier side.
Does EDI improve processing times, or do modern tools do it better?
EDI can cut posting errors at scale, but setup and mappings add work. Modern AP tools handle approvals, vendor onboarding, invoice capture, remittance advice, and real time status on ACH and wires, which is often faster to deploy and easier to maintain. For many teams, modern tools cut processing times by removing duplicate keying and reducing human error across approvals and reconciliation.
When should small teams skip EDI entirely?
If no major customer mandates EDI, skip it and run ACH and wires from your AP platform with clear remittance details. If a large partner later mandates EDI, start with web EDI rather than a direct EDI build so mappings and testing stay light.
