We live in a digital age. More than 79 percent of Americans shop online regularly, and even those who don’t likely rely on a computer for at least some of their daily functions. The highest adopters, both as individuals and professionals, have come to rely on computers, software, and digital assets for almost all their needs, forgoing paper and manual processes in favor of something more efficient and less expensive.

If your business hasn’t adapted to keep up with this new standard of operation, it’s going to fall behind—and sooner, rather than later. That’s what electronic data interchange (EDI) is all about—but before you can use it to transform your enterprise, you need to understand what it is and what it’s supposed to do.

The Basics

EDI is a computer-to-computer transaction of business documents that were previously exchanged in a paper format, now using a standardized electronic format. For example, rather than sending a purchase order (PO) or an invoice through the mail, businesses using an EDI system would be able to send those documents online, replacing methods like traditional mail, fax, or even email.

There are several “standard” formats for this exchange, but each of them shares a similar purpose. When the format is the same between exchanging parties, or when the format can easily be altered, those documents can be incorporated into any other software that needs to make use of the information in those documents. This makes it far easier for businesses to communicate key pieces of information.

These are just the basics, so if you’re looking to learn more, 1EDIsource has an excellent, thorough guide on the subject.

Why It’s So Important

So why is EDI such an important upgrade to make?

  • Cost savings

First, you’ll save money on whatever method you currently use to transmit documents. Depending on your current systems, you could save at least 35 percent on your total expenditures.

  • Speed and accuracy

EDI also transmits documents faster. Compared to traditional mail, you’ll save several days of transmission time when placing a purchase order or sending out an invoice. Compared to email, you’ll be on par—but you’ll also reduce your error rate. Since you’ll be following a standardized format and transmitting with a reliable system, you’ll suffer fewer miscommunications.

  • Efficiency

Much of EDI is automated, which means you’re going to save time and improve productivity. Employees can easily follow the templates offered by your EDI system rather than manually filling out new documents, then use the extra hours they save to do more productive work.

  • Strategic insights and possibilities

Finally, relying on an EDI system affords you real-time monitoring and transparency on your document transmission status. You can also review data over time, and use those data to make more impactful strategic decisions. With EDI in place, you may even be able to enter new markets or engage in new types of business altogether.

How to Begin an Upgrade

So how should you go about transitioning your current system to an EDI system? That depends on what current system you’re using, which systems your partners are using, and how much you’re willing to spend. With an unlimited budget and unlimited time, you could hire your own EDI developers and build an entirely customized system from the ground up.

However, most small- to mid-sized businesses will benefit best by working with a third-party EDI specialist that already has a solution in place. Explore your options, and give each system a trial run before you finalize your decision.