An EDI INVOIC Invoice is an electronic version of a paper Invoice or bill. EDI stands for Electronic Data Interchange. Companies use EDI to reduce the errors and costs associated with the manual keying of data, and to speed up the process of sending and receiving Invoices.
A supplier will use the INVOIC Invoice to communicate to a buyer the specific items, price, and quantities they have delivered and now must be paid for by the buyer. Payment terms will usually accompany the billing information.
Most suppliers will also want to receive a 997 Functional Acknowledgment back after the buyer receives the INVOIC Invoice. The buyer sends the 997 Functional Acknowledgment back to the supplier to indicate that they successfully received the Invoice.
EDI documents are sent and received electronically using a VAN. VAN stands for Value Added Network. Part of the EDI Invoice document will contain envelope information. The envelope information specifies which company is sending the document and which company is receiving the document. The sending and receiving companies are called trading partners because they exchange or “trade” the EDI Invoice and Functional Acknowledgments.
EDI is a mature electronic document format that has been carefully defined both by the companies that require their trading partners to use EDI and by standards bodies. The two recognized standards for EDI are ANSI X.12 and UN/EDIFACT. ANSI X.12 is by far the most widely used standard in the United States. UN/EDIFACT is more popular outside the United States, although it is used by US automotive manufactures.
Each EDI INVOIC Invoice document will have data organized into segments and data elements. Each segment contains at least one data element. Each data element is a data field. Examples of data elements on the Invoice include vendor number, item, quantity, price per item, street address, city, state and zip code, just like on a paper Invoice. The standards bodies have allowed for every conceivable possibility for data on the EDI Invoice document. Any one company will use a small subset of the available choices within the ANS X.12 or UN/EDIFACT standards. An EDI system is necessary to process their EDI documents into a back office system or into human readable form.
Each company that requires its suppliers to use EDI will have an EDI Guide or mapping document. The EDI Guide will specify each segment and data element, the allowable values for each, and the applicable business rules that must be followed. EDI guides are detailed and extensive. It is not unusual for an EDI Guide to be more than 100 pages long.