Small Business Brief

Technology & Software

Everything You Need to Know About Electronic Data Interchange

Manually producing invoices and managing inventory can cost companies a lot of money. So can generating shipping receipts. An electronic data interchange removes the burden on staff and can generate big savings.

Throughout the global market, businesses are cutting cycle times. They are also increasing the speed of transactions. Some businesses have seen as much as a 95 percent cost decrease when using EDI.

With savings like that, it makes sense to learn about and invest in EDI. When you add an EDI solution you can increase staff productivity. You can also reduce errors and increase profit margins.

There’s a lot to know about electronic data interchange. This quick guide will set you on the right path to integrating EDI into your small business.

What Is Electronic Data Interchange?

Electronic data interchange (EDI) is a process in which documents are transmitted between two computers automatically. The documents are typically standard business documents. These include invoices, receipts, shipping notices, and purchase orders.

EDI creates a network between businesses throughout the world. Documents can be exchanged between different platforms and software systems.

Computer-to-computer exchange happens through standardized documents. The EDI system translates a business’s internal documents and data. Using a mutual language it sends the documents to the other business. The computer on the other end then reverses the process.

How Does Electronic Data Interchange Work?

EDI systems access a business’s internal systems. They then generate and find documents that customers need. The EDI platform works out which data is needed by each client on each kind of document. The platform then creates documents that are needed.

Once the invoices or shipping orders are created the computer interfaces with the customer’s computer. The documents are then automatically exchanged between the two companies. 

If a business wants to incorporate electronic data interchange into its workflows, it will need an EDI provider.  

What Are the Benefits of Electronic Data Interchange?

The biggest benefit for a company using electronic data exchange is time saved. Because the creation and sending of a document are automatic it happens instantly.

International time zones are irrelevant. Finding another human at the other company no longer matters. Everything is speeded up.

Speeding things up helps with inventory management, lead times, and cash-flow management.

Another benefit is the automation of a manual task. With automation, employees don’t have to spend time finding information and generating documents. Instead, they can focus on other, more business-crucial tasks.

Companies using EDI also reduce the amount of human error. Computer-to-computer exchanges do not create typos or miss important pieces of information.

EDI systems also include security options. Businesses can set user privileges and track actions. They can also create an audit trail if required.

Start Using Electronic Data Interchange for Your Business

If your business currently creates shipping orders, purchase orders, invoices, and receipts, using an electronic data interchange makes a lot of sense. You’ll save time and money. You’ll also see reduced errors and unnecessary human interactions. And you’ll have more and better tracking information.

We believe that businesses need information about systems and processes that can help increase profits. If you think the same way, keep coming back to our website. We regularly post new articles that show you how you can improve workflows and make more money.