Comprehensive Guide to EDI Documentation

Table of Contents

Believe it or not, there was a time when healthcare providers, global enterprises, Ecommerce stores, and other organizations used proprietary—and often very different—methods to communicate with other businesses for everything from invoices to purchase orders. You can maybe imagine how difficult communication between businesses was before the introduction of EDI.

Key Takeaways

Five key takeaways from this comprehensive guide to EDI documentation are:

Electronic Data Interchange, or EDI, is the digital exchange of business information in a standard format.
Organizations use electronic data exchange to transfer documents, such as purchase orders, invoices, and shipping notices.
Electronic data interchange documentation explains how to convert business documents into a standardized format to electronically transmit these documents between participating businesses' systems.
EDI documentation supports the secure and efficient exchange of patient data and administrative information in the healthcare industry.
EDI documentation is the detailed records and instructions that tell your staff how to structure, transmit, and process EDI transactions.

Electronic Data Interchange (EDI) has revolutionized how businesses exchange information, making data transfer seamless, efficient, and—best of all—standardized. This guide provides a comprehensive overview of EDI documentation and its applications in various sectors, particularly healthcare.

Understanding the benefits of EDI, its uses, and its documentation requirements helps businesses guarantee compliance, enhance operations, and keep accurate records. So, what are these documents, what do they consist of, and what is the proper document structure and formatting?

What is EDI Documentation?

EDI documentation is like the blueprint for your digital data exchange—the detailed records and instructions that tell your staff how your EDI transactions are structured, transmitted, and processed. It's important to understand the EDI format—EDI data mapping guidelines, data formatting rules, and transaction sets—and how EDI automates business document exchange.

Accurate EDI documentation helps people on your team and the teams of businesses or entities you do business with understand your communications. Accurate documentation of how these communications are structured helps teams comply with agreed-upon procedures.

The main aspects of EDI documentation are:

Data formats and standards: Explains the structure and format of EDI documents.
Transaction sets: Think of these as pre-defined structures for specific types of documents (e.g., invoices, purchase orders).
Data elements: These are the individual pieces of data within a transaction set.
Segments: Data elements are grouped together to form segments.
Envelopes: These are the digital versions of actual envelopes—these identify who's sending the data, the data's intended receiver, and the type of transaction the data is referencing.
Implementation guidelines: Provides instructions for setting up and using EDI systems.
Communication protocols: Outlines the methods for transmitting data securely.
Data security and compliance requirements: Ensures exchanges meet stringent data integrity and compliance regulations.

Accurate EDI documentation helps you guarantee your healthcare, Ecommerce, or other business communications are free of errors and meet or exceed compliance requirements. Creating this documentation requires a deep understanding of EDI documents themselves.

Types of EDI Documents

EDI documents are electronic documents that replace paper documents, facilitate data exchange between businesses, and help automate and streamline various processes. All EDI document types correlate to a specific function.

Some of the most common EDI documents and their uses include:

EDI 810: An EDI 810 is an invoice. A seller sends an 810 | Invoice to a buyer to request payment for goods or services. The EDI 810 includes all the details you'd expect to see on an invoice: the amount owed, payment terms, and itemized descriptions of what the seller provided to the buyer.
EDI 850: The EDI 850 is a purchase order. When a buyer places an order for goods or services, an 850 | Purchase Order is used. The purchase order has information about the product or service the buyer is ordering, the quantity of each product or service they're ordering, the price of each product or service, and where the seller should deliver the product(s) or service(s).
EDI 855: An EDI 855 is an acknowledgment of a purchase order. This is the seller's way of saying "We got your order!" It confirms the order was received and, if there are any disparities (such as an inventory mistake), the 855 | Purchase Order Acknowledgement might include changes, like updated delivery dates for backorder items or price adjustments for items that are out of stock or discontinued.
EDI 997: An EDI 997 is like a digital receipt. Like the EDI 855, an EDI 997 | Functional Acknowledgment is a confirmation of receipt by one party of an EDI document from another party. EDI 997s are executed after every transmission and create an audit trail for recording successful document processing. In some cases, an EDI 997 may create a flag to notify both parties of any errors discovered during document processing.

Most of today's data exchange occurs over the internet via standardized protocols such as AS2 and AS4. These data exchange protocols guarantee the secure and efficient transmission of EDI documents and boost the reliability and speed of modern business transactions.

What Are the Four Parts of an EDI document?

Not every EDI document contains the same information. For example, an invoice doesn't look like a purchase order and a purchase order doesn't resemble a shipping document.

However, every EDI document has four main parts:

A header: An EDI document's header contains its metadata — think of it like an "about" section, where you find details like the sender's information, receiver's information, date of creation, and a timestamp.
Data segments: Data segments are the meat of the document, organized into sections of data elements.
A trailer: A trailer is information that marks the end of the document's data segments. The trailer may also include summary information.
Control: An EDI document's control helps prove data integrity and the document's sequence. It functions as a quality control check for your data and the document itself.

The correct placement of information within an EDI document paves the way for accurate, compliant communications.

Understanding EDI Format

When creating an EDI documentation guide for your organization, EDI specs is one of the most important things to cover because it lays out in detail everything your team will need to create error-free, compliant EDI documents.

EDI File Formats and Standards

There are some big differences between XML-based and traditional EDI formats.

The most common EDI documentation formats you'll come across are:

American National Standards Institute ANSI X12: Widely used in North America, with many transaction sets adopted globally to meet the needs of cross-border sales.
EDIFACT: An internationally recognized standard for data exchange employed in some global transactions.
TRADACOMS: An EDI formatting standard primarily used in the UK retail industry.

Electronic Data Interchange Specifications (EDI Specs)

EDI specifications are like EDI document blueprints. These specs define the structure, format, and content that make up these digital transactions and guarantee accurate, consistent, industry-standard data messaging.

Let's take a closer look at these EDI specs, why they matter, and what they contain:

Structure and format: EDI specs lay out the specific structure and format that all EDI documents must follow. Specs include how data elements, segments, and transaction sets should be arranged within the document to be correctly understood by trading partners' systems.
Content requirements: EDI specs explain what data elements are mandatory and which are optional. This guarantees that all the necessary information is included and that its presentation is standard. For example, an 850 Purchase Order spec might require data elements like purchase order number, item details, quantities, and delivery instructions.
Compliance: Following EDI specs helps organizations remain compliant with industry standards and regulatory requirements, which are especially important in industries like healthcare and finance, where non-compliance can result in hefty penalties and business disruptions.
Interoperability: The standardization of EDI specs promotes interoperability between different systems, organizations, industries, and regions. Using standardized formats and structures helps businesses seamlessly exchange data with a wide range of trading partners, regardless of the software program, EDI integration, or data integration platform used.
Error prevention: Comprehensive EDI specs should be easy to understand to help prevent errors during data exchange. By providing detailed, user-friendly guidelines on how to format and structure data, EDI specs reduce the risk of misinterpretation, missing data elements, and other common issues that can disrupt business processes.

EDI implementation can be challenging. Businesses should ensure that EDI documentation accurately reflects the latest specs and that all systems are configured to generate and process EDI documents according to these guidelines.

Regular training and updates can help keep staff knowledgeable about current EDI specs and best practices.

What Are EDI Transactions?

EDI transactions are the building blocks of electronic data interchange. Transactions allow businesses to exchange a variety of documents electronically with trading partners.

EDI transactions are varied, with each serving a specific business purpose. EDI transactions offer:

Definition and purpose: An EDI transaction delivers a specific type of business document between trading partners. A document can be an invoice, purchase order, advance shipping notice, or other acknowledgment. Each transaction type is designed to facilitate a particular business process, ensuring that information is exchanged accurately and efficiently.
Standardization: EDI transactions follow industry-specific guidelines, such as ANSI ASC X12 in North America or UN/EDIFACT internationally. These standards have consistent document formatting so different programs and systems can interpret and process the data.
Efficiency: EDI transactions automate the exchange of business documents and significantly improve operational efficiency. Manual data entry and paper-based processes are outdated, and modern businesses' automated workflows reduce the time and effort spent managing transactions, which leads to faster order processing, quicker payments, and even improved supply chain management.
Error reduction: EDI transactions validate your business documents and minimize the errors of manual data entry. Standardized formats and automated processes transmit data accurately and reduce the risk of discrepancies and misunderstandings between trading partners.
Security: EDI transactions transmit data via secure communication protocols such as AS2 or AS4. Security protocols help safeguard against breaches, restrict unauthorized access, and protect sensitive business information during transmission.

Types of EDI Transactions

EDI transactions are varied, each corresponding to a specific document or business process. Some common EDI transaction types include invoices (accounts receivable), purchase orders (accounts payable), and acknowledgments.

"But aren't those EDI documents?"

Fair question.

EDI documents contain all the data and information for transmission, and EDI transactions are the recording and transmitting of those documents—in other words, the actions or activities that transpired to create the data in the corresponding EDI document.

How Do Transaction Types Affect EDI Documentation?

The EDI transaction type determines how it's structured and the content it requires. For example, an 850 Purchase Order includes details about the items ordered, quantities, and delivery instructions, while an 810 Invoice shows the amount due, payment terms, and itemized charges. Your teams must learn the specific requirements for each transaction to create accurate and compliant documents.

Maintaining standards helps businesses guarantee that data exchanges are accurate, consistent, and compliant with industry regulations. This maintenance strengthens the organization and its relationships with trading partners because it proves reliability, attention to detail, and transparency.

EDI Transmission Protocols

EDI transmission protocols are like different delivery methods you might use to send or receive a package. Transmission protocols are the ways we transfer EDI documents between different systems and organizations. Each protocol has its own strengths, offering varied levels of security, reliability, and complexity.

To help you understand EDI transmission methods, think of the different types of mail delivery services—some are better than others depending on the nature of what you're shipping.

With that in mind, some common EDI transmission protocols include:

FTP (File Transfer Protocol): File Transfer Protocol, or FTP, is like the postal carrier who delivers your mail each day. It's a basic network protocol that moves files between a client and server over a network. While FTP wasn't specifically designed for EDI, it's sometimes used to transmit EDI documents because it's fast and easy to use. However, FTP isn't the most best option for sensitive information. To beef up security, organizations may pair FTP with another secure transmission protocol like FTPS (FTP Secure) or SFTP (SSH File Transfer Protocol), which add encryption and secure authentication.
AS2 (Applicability Statement 2): Applicability Statement 2 (AS2) is like the certified next-day air mail of EDI protocols. It's widely used and enables secure and reliable exchange of EDI documents over the internet using HTTP. AS2 uses encryption and digital signatures to keep your data safe and intact during the transmission process. This method also provides proof of receipt, so both the sender and receiver can verify that a message was sent and received. AS2 is popular in industries like retail and manufacturing because it's secure and can handle high transaction volumes.
AS4 (Applicability Statement 4): AS4, like AS2, is like certified mail, but think overnight express and signature required. AS4 is designed to provide similar functionality as AS2 with some additional features and added support for more complex messaging scenarios. AS4 uses web services to exchange EDI documents with enhanced security, reliability, and flexibility. It's particularly suited for industries with strict security and compliance requirements, such as healthcare and finance.
VANs (Value-Added Networks): Value-Added Networks, or VANs, are like a private courier service that strictly handles EDI "mail." VANs are managed networks that simplify secure EDI document exchange between trading partners. VANs offer a variety of services, including data translation, secure transmission, and transaction management with a high level of security, reliability, and extras like message tracking, auditing, and error handling. This method is particularly useful for businesses that need strong, managed EDI infrastructure without investing in and maintaining their own systems.
SMTP (Simple Mail Transfer Protocol): SMTP is like using a generic email service to send EDI documents. This method transmits EDI documents like email attachments, so while SMTP is widely available and easy to use, it's not as secure or reliable as other protocols. For enhanced security, organizations might use an encrypted email solution or a secure email gateway.
HTTPS (Hypertext Transfer Protocol Secure): HTTPS is like sending your EDI documents through a secure website. As an extension of HTTP, HTTPS uses encryption to secure data transmitted over the internet. It's commonly used for web-based EDI transactions, such as Ecommerce sales, and provides a secure, reliable means of exchanging documents. HTTPS ensures data integrity and confidentiality, making it suitable for businesses that require secure online transactions, but shouldn't be used for transmissions that must maintain a high degree of confidentiality.

When choosing an EDI transmission protocol, organizations should consider factors like security, reliability, cost, and ease of implementation. Each protocol has its strengths and weaknesses, and the best choice depends on the specific needs of the business, its industry, and its trading partners. With the right protocol, businesses can maintain secure, efficient, and compliant EDI transactions.

Recommended Reading: The Complete Guide to FTP, FTPS, SFTP, and SCP

EDI Documentation: Troubleshooting Challenges, Engaging in Best Practices, and Using Resources

It's important to be mindful of the common challenges that can arise in EDI documentation, during implementation phases and even once you've established your organization's EDI methods.

Troubleshooting Challenges

Common issues you might run into include:

Inaccurate data: Use validation programs to look for errors before transmission.
Compliance: Schedule regular reviews of requirements and keep compliance documentation up to date.
Legacy or proprietary system integration issues: Use data integration platforms to help bridge gaps between disparate programs and systems.

Other errors you could run into include:

Data Formatting

Data formatting mistakes happen if the data doesn't conform to the required EDI format or standard. This nonconformity can be due to missing data elements, incorrect data types, or improperly structured segments.

To troubleshoot:

Use EDI validation tools to pinpoint the exact issue in the EDI document.
Adjust the data to fix the mistake, conform to the required format, and/or comply with requisite standard.
Implement validation checks and train staff to ensure all data is correctly formatted before transmission.

Transmission Failures

Transmission errors happen when there's an issue with sending or receiving EDI documents. Common causes include network issues, incorrect receiver information, or problems with the transmission method.

Troubleshooting steps include:

Checking network connections, transmission logs, and recipient details to find where the failure occurred.
Fixing any network problems, correcting recipient information, or adjusting protocol settings as needed.
Using reliable transmission protocols and performing regular network maintenance to minimize transmission failures.

Compliance Discrepancies

A compliance discrepancy occurs when EDI documents don't adhere to industry-specific standards or regulations. Discrepancies can lead to rejections by trading partners or regulatory bodies.

To troubleshoot:

Verify that all EDI documents meet the necessary standards and regulations.
Update your documents to comply with the required standards.
Regularly review and update your EDI processes to stay aligned with evolving standards and regulations.

In addition to learning how to troubleshoot common problems, keep your staff up to date on current best practices.

Engaging in Best Practices

You can mitigate these challenges by engaging in these EDI documentation best practices:

Define clear standards and guidelines: Ensure all parties—from your staff to the partners you work with—understand the requirements.
Use consistent formats: Adopt standardized data formats to protect against formatting errors.
Regularly update EDI documentation: Maintain current documentation aligned with industry standards, changes, and updates.

Using Tools and Resources

Tools and resources that can assist your EDI documentation efforts include:

EDI software programs: These tools help streamline the translation and transmission of data.
Industry-specific guides: Industry regulators often provide documentation to help organizations meet standards.
Regulatory compliance resources: Know the regulations that apply to your industry and reach out to regulatory bodies for tools, guidance, and updates to compliance requirements.

How Organizations Use EDI in Different Industries

Electronic Data Interchange is a versatile technology that addresses the unique needs of various industries. EDI enhances operational efficiency, accuracy, and security across different sectors through automation and standardization.

Here’s a brief look at how organizations use EDI in different industries (followed by more detailed information):

EDI in Ecommerce and Retail

In the Ecommerce and retail industries, EDI helps manage the supply chain and business inventory.

Using EDI for data exchange helps online and traditional retailers with:

Purchase orders
Invoices
Shipping notices
Inventory updates

…and inventory updates are perhaps the most important on the list when it comes to CSAT scores. Especially for Ecommerce stores or traditional retailers with an online presence, maintaining accurate inventory records is critical on the customer end of things.

While a lot of businesses have adopted EDI, even some major retailers haven't yet—and it shows when unhappy customers receive refunds rather than the items they bought because inventory levels weren't updated in real-time.

Retailers that adopt EDI see:

Improvements in the ordering process
Reduced internal errors
Accurate real-time inventory levels
Automated ordering when inventory dips below predetermined levels

EDI helps Ecommerce stores respond quickly to fluctuating market demands, maintain optimal stock levels, and improve customer satisfaction through accurate inventory representation.

EDI in Healthcare

EDI is essential for the secure and efficient exchange of patient data and administrative information in the healthcare industry.

Healthcare providers, insurance companies, and other stakeholders use EDI to transmit:

Claims
Enrollment information
Payment details
Eligibility verifications
Employee benefits information

The Health Insurance Portability and Accountability Act (HIPAA) set national standards for electronic healthcare transactions, promoting the use of EDI to improve data accuracy, reduce paperwork, and enhance patient care. EDI guarantees that sensitive health information is exchanged securely and efficiently, in compliance with regulatory requirements.

EDI in Automotive

The automotive industry relies heavily on EDI for communication between manufacturers, suppliers, and distributors. In the automotive industry, EDI facilitates data exchange for:

Purchase orders
Shipping schedules
Invoices
Product specifications

This rapid, real-time data exchange helps facilitate just-in-time manufacturing, where car parts are delivered exactly when needed, which reduces a manufacturer's inventory costs and improves production efficiency.

EDI also enhances collaboration between automotive companies and their supply chain partners so all parties can stay on the same production schedule and maintain high quality standards.

EDI in Logistics

In retail, automotive, and transportation industries, EDI plays a critical role in the logistics of the shipping industry. There are so many moving parts in just one online customer order!

EDI facilitates data exchange for:

Customer shipments
Tracking information
Delivery confirmation

Logistics providers can use EDI to coordinate with shipping carriers, warehouses, and customers, so deliveries are shipped and delivered on time with real-time tracking. EDI in logistics helps improve visibility into the supply chain, reduces time in transit, and enhances overall customer satisfaction.

EDI in Finance

In the finance industry, organizations use EDI to electronically exchange financial documents such as:

Invoices
Payment instructions
Remittance advice

Financial institutions and businesses using EDI can automate transactions, reduce processing times, and improve the accuracy of transactions for accounts payable, accounts receivable, and more to help promote prompt and accurate payment processes.

EDI in Government

Government agencies use EDI to streamline the exchange of information with business partners and other agencies for:

Procurement processes
Tax filings
Regulatory reporting

When government agencies automate these data exchanges, paperwork is reduced, data accuracy is improved, and operations efficiency enhanced. Electronic data exchange is a powerful tool regardless of industry. Businesses can boost internal performance and improve relationships with customers and business partners.

However, doing so requires a good grasp of how EDI works and the underlying documentation that ties it all together.

Protect Your Organization with Accurate EDI Documentation

Accurate EDI documentation protects your organization and the relationships it has with other businesses. Proper documentation confirms adherence to regulations, reduces errors, and enhances overall operations.

Integrate.io offers robust solutions for EDI documentation and can help your business maintain accurate records and streamline data exchange.

How Integrate.io Helps with EDI Documentation

Integrate.io offers a comprehensive platform designed to streamline data exchange, maintain precise records, and enhance your EDI documentation process, including 834 file layout, EDI data mapping, and data integration, validation, and transmission. We can help your business achieve accurate and efficient EDI practices.

To see for yourself, sign up for a free, 14-day trial of the Integrate.io platform. If your use case is unique, schedule an intro call to gain access to one of our expert Solution Engineers and a one-on-one walkthrough of the platform in action.

FAQs

What is EDI for?

EDI replaces traditional paper-based documents, facilitating faster, more accurate, and cost-effective communication. EDI is widely used in various industries, including retail, healthcare, manufacturing, and logistics, due to its efficiency in streamlining business processes.

What is EDI documentation?

EDI documentation refers to the comprehensive records and guidelines that outline how EDI transactions should be formatted, transmitted, and processed. The primary purpose of EDI documentation is to make sure all parties involved in the data exchange have a clear understanding of how to create, send, and interpret EDI messages.

Accurate documentation helps you maintain data integrity, confirm compliance with industry standards, and enjoy seamless communication between trading partners.

Additional Resources

Data Integration

What is EDI Documentation?

Types of EDI Documents

What Are the Four Parts of an EDI document?