The 820 has two uses. As a remittance advice, the buyer sends it to the supplier so the supplier can apply incoming cash to the right invoices. As a payment order, it can go to the buyer’s bank with instructions to make the payment. The BPR segment carries the payment amount, method and date; RMR segments list each invoice or reference being paid, with the amount paid and any adjustment.
In the order flow, the 820 comes after the invoice (EDI 810) and the buyer’s three-way match. One payment often covers many invoices, and it may net out credits, allowances and claims and deductions. Some trading partners explain those deductions separately with a credit/debit adjustment (EDI 812).
For the supplier, the 820 is the key to cash application. Without it, accounts receivable has to work out which invoices a lump-sum payment covers and why it is short. Invoice numbers that don’t match, unexplained deductions and remittances that arrive well after the funds are common problems, and they leave open items that age into disputes and write-offs.