Financial EDI Basic Description And Steps
Financial EDI solutions serve businesses to exchange payment related information with a standard format. In general, financial EDI uses the same principles as EDI for other industries (e.g. supply chain, retail etc.). However, the main difference is that two partners that exchange payments (or other financial EDI transactions) should closely work with the third party – the bank. Today more and more EDI involved companies are starting to adopt financial EDI solutions.
During the last decade, EDI for financial operations in business became one of the preferred payment method. Many trading partners confirm its advantages and competitive preferences. The process of financial EDI operations includes bank role as well. The company sends payment in the form of EDI file to the bank. The bank will receive all payment instructions and commit payment orders, wire transfers, and then will print and mail the payable checks.
Financial EDI operation steps
- The buyer extracts payment information from the company accounts payable system.
- The buyer creates EDI file (ANSI X12 820 transaction set).
- The buyer sends the EDI file to its bank.
- The bank receives the EDI 820 document and saves it into a file format. Now the file can be sent through the Automated Clearinghouse (ACH) network as an ACH transaction.
- The ACH network sends the payment data to the seller’s/receiver’s bank.
- The receiving bank credits the seller’s account with the proceeds and delivers the remittance information to the seller for automatic accounts receivable posting. The remittance data can be sent in different formats such as ANSI X12 820 or 823 format, and in a BAI format.
Common Finance EDI transactions
- 154 Secured Interest Filing
- 812 Credit/Debit Adjustment
- 820 Payment Order/Remittance Advice
- 821 Financial Information Reporting
- 823 Lockbox
- 827 Financial Return Notice
- 828 Debit Authorization
- 829 Payment Cancellation
Many companies offer EDI services and solutions for financial industry and banking. Financial EDI integration solutions may provide full integration of EDI and company ERP system. There are also special low-cost plans for companies who have low volume of EDI documents.