Meaning
Electronic document used to convey payment detail information from a buyer to a seller, explaining which invoices are being paid and which are being adjusted. An EDI 820 remittance advice assists suppliers in reconciling outstanding accounts receivable by providing a breakdown of payments and allowances. This structured data exchange eliminates manual data entry and reduces the administrative cost of processing payments.
By aligning the payment with the corresponding purchase orders, the document facilitates rapid accounting resolution.
Payment Clearance
Commercial distribution agreements rely on automated financial systems to manage large-volume transactions. The receipt of an EDI 820 remittance advice allows the supplier to apply cash to specific invoice lines, which improves cash flow visibility and reduces outstanding balances. When deductions are made for damaged items or late deliveries, the document details the codes for those charges, allowing the supplier to dispute or accept them.
This systematic clarity prevents prolonged disputes over payment discrepancies.
Dispute Resolution
Suppliers use the codes provided within the electronic transfer to identify non-compliance penalties levied by the distributor. If a retailer applies a chargeback for a delayed delivery, the supplier can check the remittance data to verify the penalty against the terms of the supply agreement. This instant access to payment details accelerates the resolution of disputes and helps maintain a healthy commercial relationship between the trading partners.
Cash Application
Automated accounting systems process the incoming payment files to update ledger balances. This automation reduces clerical errors and ensures that credit limits are restored quickly.
