This transaction set is used to communicate lockbox deposit information from a financial institution to a company. The lockbox service provider (typically a bank) sends the 823 to the receiving company to report cash collections received and deposited on the company’s behalf. The transmission contains structured deposit details organized through mandatory N1 (Name) loops identifying the parties involved, followed by DEP (Deposit) loops containing the core deposit information. Each deposit record includes an AMT (Monetary Amount) segment specifying the deposit total and QTY (Quantity) segment indicating the count of items, along with optional reference and date information to support reconciliation.

Consider a practical example: MegaCorp Manufacturing uses ABC Bank as its lockbox provider. When ABC Bank receives customer payments at its lockbox address, it scans the remittance documents, deposits the funds, and sends MegaCorp a daily 823 transaction detailing that day’s collections. The 823 message identifies ABC Bank and MegaCorp in the N1 loops, then reports individual deposits in the DEP loops—for instance, one deposit of $125,000 containing 47 payment items received on June 15. MegaCorp receives this EDI file automatically and reconciles it against their accounts receivable system, matching deposited amounts to specific customer payments without requiring paper documents or manual data entry.