EDI flow in the Order to Cash process

 The Order to Cash (O2C) process in EDI (Electronic Data Interchange) refers to the automated exchange of documents between a buyer and a seller, covering the full cycle from placing an order to receiving payment. Here's a step-by-step outline of the EDI flow in the Order to Cash process:

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Order to Cash EDI Flow

Step	Business Process	EDI Transaction Set	PEPPOL Equivalent (if needed)
1	Customer sends Purchase Order	EDI 850 – Purchase Order	Order (PEPPOL BIS 3.0)
2	Seller sends Order Acknowledgment	EDI 855 – PO Acknowledgment	Order Response
3	Seller sends Advance Ship Notice (ASN)	EDI 856 – ASN	Despatch Advice
4	Seller sends Invoice	EDI 810 – Invoice	Invoice (PEPPOL BIS 3.0)
5	Buyer sends Payment	EDI 820 – Payment Order/Remittance	ISO 20022 Payment Messages
6 (optional)	Buyer sends Functional Acknowledgments	EDI 997 – Acknowledgment	-

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Example Real-World EDI Flow

1. Buyer sends EDI 850 to Supplier to order 500 units of a product.

2. Supplier responds with EDI 855 confirming receipt and availability.

3. When shipping, the Supplier sends EDI 856 ASN including shipment tracking info.

4. After goods ship, the Supplier sends EDI 810 Invoice.

5. The Buyer processes the invoice and initiates payment via EDI 820.

6. Throughout, both parties may exchange EDI 997 Functional Acknowledgments.

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Key Transactions

EDI Code	Description
850	Purchase Order
855	Order Acknowledgment
856	Advance Ship Notice
810	Invoice
820	Payment Order/Remittance Advice
997	Functional Acknowledgment

Here is a detailed, step-by-step explanation of the Order to Cash (O2C) flow using EDI:

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Step-by-Step Order to Cash EDI Flow

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1. Purchase Order – EDI 850

• Who: Customer → Seller

• What Happens:
  The customer initiates the process by sending an EDI 850 document containing the details of the order:

  • Items ordered

  • Quantities

  • Prices

  • Delivery date

  • Shipping address

This replaces a manual purchase order (email, phone, or fax).

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2. Order Acknowledgment – EDI 855

• Who: Seller → Customer

• What Happens:
  The seller confirms receipt of the purchase order by sending an EDI 855:

  • Acknowledges the order

  • Confirms item availability

  • May suggest changes (e.g., quantity, delivery date)

Helps the customer know if the order is accepted as is or if changes are needed.

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3. Advance Ship Notice (ASN) – EDI 856

• Who: Seller → Customer

• What Happens:
  Before the goods arrive, the seller sends an EDI 856:

  • Describes contents of the shipment

  • Carrier details, tracking number

  • Packing structure (pallets, cartons, items)

  • Expected arrival date/time

This helps the customer prepare for receipt and automates goods receipt.

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4. Invoice – EDI 810

• Who: Seller → Customer

• What Happens:
  After shipping, the seller sends an EDI 810 invoice:

  • Billing details for the shipped items

  • Payment terms

  • Any discounts or taxes applied

This document triggers the Accounts Payable process on the customer’s side.

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5. Payment/Remittance Advice – EDI 820

• Who: Customer → Seller

• What Happens:
  The customer sends an EDI 820:

  • Confirms payment details

  • References invoice numbers

  • May include bank transfer details

 Helps the seller reconcile payments efficiently.

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6. Functional Acknowledgments – EDI 997

• Who: Both Parties (bidirectional)

• What Happens:
  Every time an EDI file is sent (like 850, 855, etc.), the receiver responds with an EDI 997:

  • Confirms that the EDI file was received

  • Indicates whether it was accepted or rejected

 Ensures message integrity and successful transmission.

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 Order to Cash (O2C) process using ANSI X12 EDI

1. Order Management
850-->Purchase Order                                  --> Customer sends an order to the supplier         
855-->Purchase Order Acknowledgment                   --> Supplier confirms receipt and status of the 850 
860-->Purchase Order Change Request - Buyer Initiated --> Buyer requests changes to a previously sent PO  
865-->Purchase Order Change Acknowledgment            --> Supplier confirms acceptance/rejection of 860   

 

2. Inventory & Fulfillment

 

856-->Advance Ship Notice (ASN)                --> Supplier notifies about shipment details            
940-->Warehouse Shipping Order                 --> Request to warehouse to ship goods                  
945-->Warehouse Shipping Advice                --> Confirms shipment from warehouse                    
943-->Warehouse Stock Transfer Shipment Advice --> Sent to notify about stock being moved to warehouse 
944-->Warehouse Stock Transfer Receipt Advice  --> Sent by warehouse when stock is received            

 

3. Invoicing & Payment
810-->Invoice                         --> Supplier sends billing details to the buyer     -->
820-->Payment Order/Remittance Advice --> Buyer sends payment information to the supplier -->

 

4. Status & Reporting
997-->Functional Acknowledgment       --> Confirms receipt of any EDI document                                 
999-->Implementation Acknowledgment   --> Used for X12 5010+ to acknowledge functional group and segment level 
864-->Text Message                    --> Used to send general messages related to orders                      
875-->Grocery Products Purchase Order --> Similar to 850 but specific to the food industry (optional)  

Optional Transactions

• EDI 940 – Warehouse Shipping Order (to 3PL)

• EDI 945 – Shipping Advice from 3PL

• EDI 844/849 – Chargebacks and Allowances