What Are EDI Payments and Why Do They Matter?

If you’re running payments for a growing business, you’ve probably come across the term EDI payments. But what is an EDI payment, and why are more companies turning to them to streamline finance operations?

In this guide, we’ll cover what EDI payments are, how they work, why they matter, and what finance teams should consider when deciding whether to implement them. You’ll also get a look at key tools on the market to help manage EDI payments efficiently. We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.

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What is an EDI payment?

An EDI (electronic data interchange) payment is a way for businesses to send both funds and structured data between systems. This data typically includes remittance details like invoice numbers, payment amounts, and payment instructions, all in a standardized digital format that both sender and recipient systems can automatically read.¹

In short, EDI payments are about more than just moving money. They’re about making sure that money is correctly matched, processed, and accounted for, without human hands needing to key in or cross-check details.

Why do businesses use EDI payments?

Finance leaders working for companies with large vendor networks or international operations know that manual payment processes are prone to delays and errors. EDI payments help tackle these pain points in a variety of ways.

Reduce manual work

Payments and data flow directly between systems, cutting down the need for manual reconciliation.

Improve accuracy

Structured payment details reduce the risk of misapplied payments or mismatched invoices.

Speed up payment cycles

Automated processing helps payments get sent, received, and reconciled faster.

Strengthen relationships

Timely, accurate payments build stronger partnerships with vendors and suppliers.

These advantages make EDI payments especially attractive for businesses scaling up or managing complex supply chains.

How do EDI payments work?

Here’s a simplified look at the flow:

1. Agreement on standards: Both the paying and receiving companies agree on which EDI format to use (for example, the widely used EDI 820 Payment Order/Remittance Advice).²
2. Data preparation: The sender’s finance system generates payment instructions and remittance details, formatted to match the agreed EDI standards.
3. Secure transmission: The EDI file is sent to the recipient’s system, often through a secure Value-Added Network (VAN) or other EDI gateway.
4. Automated processing: The recipient’s system reads the data, applies the payment to the right accounts or invoices, and updates its records.

EDI vs ACH vs EFT: What’s the difference?

It’s easy to confuse EDI with other payment types, such as ACH or EFT, but they serve different roles.

• ACH (Automated Clearing House): he US network used to move money electronically between banks.
• EFT (Electronic Funds Transfer): A broad term covering all digital money movements, including ACH, wire transfers, and card payments.
• EDI (Electronic Data Interchange): The data layer that sits on top of payments, containing detailed remittance or order information.

You can send ACH payments without EDI, but then the recipient may need to manually reconcile which invoices you’ve paid. EDI adds clarity, making sure the data travels with the money.

Benefits of EDI payments

EDI payments offer real, practical gains for finance teams. Here’s why more businesses are making the switch.

Less manual intervention

Without EDI, your finance or accounts payable team often has to match payments to invoices by hand. That takes time, increases the chance of mistakes, and eats up valuable resources.

With EDI, payment details and remittance data are formatted consistently and flow automatically between systems. Your team spends less time chasing down mismatched records or correcting errors and more time focusing on work that moves the business forward.

Lower error rates

Manual matching comes with risk. A wrong invoice number or missing reference can lead to misapplied payments, supplier disputes, and extra reconciliation work.

EDI reduces that risk by using structured, standardized data that systems on both ends can read easily. The result is greater accuracy inside your company and more trust and confidence from your vendors.

Faster reconciliation

With EDI payments, you don’t have to wait for someone to open an email or check payment details by hand. The system automatically matches incoming payments to the right invoices, often in real time.

As a result, your close process speeds up, financial records are cleaner, and you can deliver more timely reports to leadership. For vendors, it means they get paid and updated faster, improving their own cash flow.

Better scalability

As your business grows, your payment volume grows too, and manual processes can’t keep up. What worked when you were paying a few local vendors won’t work when you’re managing hundreds of suppliers across markets.

EDI lets you automate large-scale payment flows without adding more headcount or overhead. That scalability is key for businesses looking to expand efficiently.

Cost savings over time

Setting up EDI takes upfront investment in systems, integration, and maybe third-party networks. But over time, the cost savings are real. By cutting down on manual work, reducing errors, and improving efficiency, you save on labor, rework, and late payment fees.

Those savings add up, making EDI not just a technical upgrade but a smart financial move that supports long-term growth.

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Some key benefits of Wise Business include:

Major local account details to receive international payments with ease No monthly account fees just a simple one-off fee for account details Receive payments from e-commerce platforms such as Amazon or via Stripe. Free invoicing tool to generate and send invoices. Create invoices using the Wise invoice generator or invoice templates. Accounting integrations, including a QuickBooks Bill Pay connection. Bill payments will be synced, matched, and categorized in QuickBooks for simple reconciliation. Access to BatchTransfer. Fast payment of up to 1,000 people.

Challenges to consider

EDI payments aren’t ready for every single business out of the box. Finance teams should be aware of a few challenges.

Initial setup complexity

Implementing EDI requires technical integration and coordination between systems.

Vendor alignment

Both sides must agree on formats and standards, which can involve negotiation and testing.

Cost of EDI networks

Many companies use third-party VANs to handle EDI data, which can add ongoing fees.³

Limited use for ad hoc payments

EDI works best for high-volume, recurring transactions, not occasional or one-off payments.

How to implement EDI payments: A five-step plan

Thinking about adding EDI payments to your finance stack? Here’s a practical roadmap.

1. Assess your payment needs

Look at your current payment volumes, error rates, and manual workload. If you’re handling a high number of transactions or regularly working with EDI-enabled partners, the switch may deliver strong returns.

2. Review your current tools

Check if your ERP, accounting, or payment software supports EDI. Some platforms, like Tipalti or Bill.com, offer EDI integration or modules.

3. Choose the right EDI provider

Consider platforms like:

• Tipalti: A global payables automation platform offering built-in EDI features for companies with large supplier networks.
• Bill.com: A business payments platform that supports EDI remittance alongside ACH, wire, and card payments.
• SPS Commerce: A specialized provider for retail and supply chain EDI, including payments and remittance.
• Paystand: A blockchain-based B2B payment platform offering EDI capabilities alongside automation tools.

Compare pricing, features, and integrations to find the best fit for your setup.

4. Align with key vendors

Work closely with your largest or most strategic vendors first. Make sure you agree on:

• EDI standards and versions.
• Testing protocols.
• Go-live dates and contingency plans.

5. Launch a pilot program

Start small. Roll out EDI payments with a limited group of vendors, track performance, and gather feedback before expanding across your network.

Best practices for finance leaders

To make the most of your EDI payment investment:

• Prioritize high-impact partners: Focus on the relationships where automation will bring the biggest benefits.
• Monitor performance: Set up regular reviews of error rates, processing times, and cost savings.
• Keep your team trained: Ensure finance and IT teams understand EDI workflows and know how to troubleshoot issues.
• Stay flexible: Be ready to adjust as EDI standards or partner requirements evolve.

Final thoughts

EDI payments might not be the flashiest part of your finance stack, but they can quietly transform the way your business handles money. From fewer manual tasks and faster reconciliation to better accuracy and long-term savings, the benefits add up.

As your business scales and the volume of payments increases, automation is a necessity. EDI helps you stay on top of operations without adding complexity or headcount. And for finance leaders focused on speed, control, and reliability, it’s a tool worth serious consideration.

Start with one process or supplier. Test it, learn, then scale it up. With the right setup, EDI will support your finance team and strengthen the entire business.

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Sources:

1 - What is EDI | EDI Basics
2 - EDI | Tipalti
3 - Knowledge Base EDI Van | Cleao