EDI 850: Digital purchase orders reduce errors, streamline order process

by | Dec 8, 2017

With EDI and the 850, the days of faxing or emailing (or snail mailing!) purchase orders to a seller – and hoping they received it – are over. For faster receipt and on-time (or faster) delivery, place orders with an EDI 850, which is the electronic purchase order (PO) sent from a buyer to a seller, requesting goods or services.

Electronic data interchange, or EDI, standardization and automation can ensure PO receipt, as well as set in motion a series of other documents to update the status of the order as it progresses through the order management system. The EDI 850 is one of the two most basic transactional documents that should be part of an automated EDI system (the other basic document is the EDI 810 seller’s invoice).

Data included on EDI 850 purchase orders

With EDI, all purchase order data is standardized between trading partners for each organization’s specific needs. The key data elements that are included in an 850 include:

  • PO number
  • PO date
  • Item prices
  • Item descriptions
  • Vendor number
  • Requested ship and/or delivery date
  • Location(s) where the product or services should be supplied to
  • Product Item Identifiers/Services such as UPC/EAN/GTIN needed with their respective quantities

EDI 810 electronic purchase orders may also include carrier and service levels, expected charges and/or allowances, buyer item number, vendor part number and additional dates (Ex: cancel by dates). The PO is also called an EDI 875 in the grocery industry.

PO automation speeds processing, reduces errors

With the EDI 850, you’ll not only reduce the amount of time it takes to place orders, you can reduce the chance for errors, lost orders and other problems that might interrupt the flow of inventory. It can also speed up the fulfillment of orders and lets you lower the amount of on-hand inventory, since you can automatically trigger a purchase order once you reach a certain level in your overall inventory. EDI digital purchase orders can assist with other processes, such as post-promotion audits.

If your supplier uses EDI software, the EDI 850 can even trigger a purchase order acknowledgement (POA or EDI 855) that shows the amount of inventory the supplier has, as well as its availability. Plus, because you’re both using EDI software, all the information will all be standardized between you and your suppliers. So they don’t need to reformat their data to your system, which ensures compliance, accurate data collection and smooth data transfer.

Vital part of automatic three-way match

Best of all, the EDI 850 is a vital component of the most basic reconciliation process of three-way matching. Three-way match documents consist of the purchase order, the packing list received on delivery of the goods, and the invoice sent by the seller. Once all three documents are received, the EDI system can automatically compare them to make sure all values match.

Three-way match can save a lot of money and time in manual comparison and reconciliation. There’s no need to assign staff to pull every transaction and determine whether the terms of the original PO were fulfilled — it’s all done by the EDI system. With less time required for processing invoices, money can be saved on wages or the staff can be redeployed to another part of the business. Payments can either be scheduled so they’re sent automatically or sent to the appropriate manager for final approval of payment, which can be especially important if a supplier offers any time-based discounts for early or on-time payments. Automatic three-way match can also eliminate instances of invoice fraud, further reducing costs by preventing businesses from spending money on fraudulent transactions.

For more deep-dives into common EDI documents and transactions, take a look at our previous posts about EDI 860 purchase order changes and EDI 856 advanced shipping notices. To learn more about EDI systems to automate transactions, visit the SPS Commerce website. You can also request to speak to one of our representatives about how the SPS EDI solution can help your business.

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Scott Bolduc

Director of Supply Chain Strategy at SPS Commerce
Scott Bolduc is a multi-time winner of the Supply & Demand Chain Executive Pros to Know. He has worked with e-commerce retailers on their growth strategies and helped retailers transform their freight spending strategies to maximize efficiencies.
Scott Bolduc