What on Earth is An Electronic Data Interchange?

As a business owner, you’ve probably had to send invoices, receipts, or other documents to other businesses, at some point. In a lot of cases, this is done with paper documents. But, in the modern world of business, this is considered inefficient and outdated. So, what do companies use? Well, most organizations will use an EDI or electronic data interchange, to handle the job. But, what on earth is an EDI?

In simple terms, an EDI is a transfer of data between one computer to another, without the need for a human in the middle. It’s generally done this way to improve the quality of data and limit the risk of human error. Of course, though, it’s a little more complicated than that.

elctronic

(Image Credit)

For data like invoices or medical records, an EDI is perfect. An EDI will store data in strings, much like a database. Which makes it much easier to store the data after the fact. These strings are encoded using one of several standards, which the other end of the communication will also be using. For example, a car insurance provider will use an EDI between them and your country’s licensing agency, to figure out if you have a driving license. Or, one company may use an EDI to send an invoice to another company, with the other company sending an EDI back to confirm the payment.

By limiting the human contact with a system, you limit the chances that problems will occur due to human error. You also ensure that both organizations have an identical document at the end of the communication. This creates an ecosystem that revolves around accurate and up-to-date information, instead of simply assuming data is correct. This is perfect for any business, as it limits the risk of many possible negative outcomes.

In the past, most companies would use paper to share data like this. Obviously, this presents certain environmental concerns. Even if your company is only producing a small amount of paper waste, you still have to consider the impact of every company using a paper system. This is because any company that you communicate with paper to will also be using paper to send data. And, if every company used these methods, the world would soon be out of paper!
edi
Of course, the difference in time between mailing or faxing a document or sending it electronically is massive. By sending documents using electronic means, the documents are almost certain to arrive instantly. And, because you don’t have to print the document, you don’t have to wait for the document to be in paper form.

Obviously, a system like this is quite complex. So, most companies will use an EDI integration service to get their systems setup. Using a company like this means that more standards can be used, limiting the amount of companies that you can’t communicate with. It will also take the weight of a busy businessperson’s shoulders.

Hopefully, this will give you a better idea of what an EDI system is, and how your business could benefit from using one. Of course, something as important as this should never be taken lightly. Make sure you do plenty of research before integrating your own system.

Leave a Reply

Your email address will not be published. Required fields are marked *