Electronic Data Interchange
Electronic Data Interchange (or EDI) is the electronic exchange of information that businesses need in order to process their financial transactions. EDI was created to help businesses communicate more efficiently and improve the supply chain by moving from paper processes to electronic. For many businesses, this means processing invoices electronically to vendors, which helps to reduce the potential for error and allows for better cash flow management.
Understanding Electronic Data Interchange (EDI) Systems
EDI systems were created in the 1970s to help address the needs of businesses to simplify and automate communications between business partners. At the time, EDI standards were developed to address items like industries and regions, meaning standards were created to ensure that the electronic data being shared between businesses, their vendors and their financial institutions was consistent.
Fast forward to our way of doing business now, and EDI is an important tool for meeting the expectations of vendor partnerships and banks, allowing businesses to process their financials more efficiently. Businesses can mandate that their supplies utilize EDI systems and EDI software as a way to ensure efficiency.
How Does Financial EDI Work?
To send a financial EDI payment, the buyer will electronically extract information from their accounts payable system. The data will then convert to an EDI standard before transmission to the organization's bank.
We then accept the instruction needed to transmit through the Automated Clearing House (ACH) network. The ACH network will then deliver the payment to the seller's bank and credit the seller. After the seller receives credit for the sale, the ACH will transmit the information to the accounts receivable system for the seller.
Benefits of Electronic Data Interchange Software and Systems
Using an EDI system offers many benefits, such as:
- Reducing operating costs: Using EDI lowers operating costs by eliminating the cost of paper, printing and document retrieval.
- Improving business cycle speeds: EDI reduces delays with manual processing and streamlines supply chain and pay-to-procure cycles.
- Increasing business efficiency: Since the risk of human error is lower with EDI, employees can devote more time and attention to value-adding tasks.
- Enhancing transaction security: EDI securely shares data across numerous communication protocols and security standards.
- Offering environmental friendliness: An EDI system is entirely online, lowering carbon dioxide emissions to promote corporate social responsibility.
EDI Software for Your Business
Our ACH/EDI remittance reporting system is a feature of our Treasury Management suite and includes additional information with incoming ACH transactions, and includes addenda detail with the ACH transactions, such as invoice numbers. With each transaction, we ensure this information is easy to understand so you can use it to quickly open entries and have access to vital information for your business. Some additional benefits of our EDI software and systems are:
- We provide information from each select SEC code's ACH transaction.
- If the addenda record features EDI information in the proper format, the EDI information will be formatted to become easier to read.
Getting Started With Our Treasury Management Solutions
Electronic Data Interchange is just one component in equipping your business to run efficiently and effectively while also meeting EDI standards. Our Treasury Management solutions include business online banking and BillPay, positive pay services, and more. Our Treasury Management teams across Pennsylvania and Ohio are ready to help your business go further. Contact us today to get started.
Additional Resources for Your Business
Avoiding Identity Theft – Download our quick guide for information on protecting your business from identity theft
Leverage Your Cash Flow – Treasury Management solutions are essential for managing your cash flow. With the right strategies, you can effectively position your finances in a way that allows you to grow. See how our Treasury Management solutions can help.
Benefits Consulting – The cost of employee benefits is often the second largest expense for businesses. Our Benefits Consulting team would love to connect with you to make sure you’re making the most of this investment