Electronic Payment Systems

Bottomline Technologies

Checkfree Corporation

Concord EFS, Inc.

Guide to Electronic Data Interchange (EDI) for Small Business

This e-commerce standard can reduce purchase-order costs and keep big clients happy
By Tonya Vinas

Electronic Data Interchange (EDI) gives businesses a secure, electronic, point-to-point connection to exchange documents — traditionally related to purchasing, but it works for all types of documents. Businesses become involved in EDI either to reduce their own costs or in response to a customer mandate. Often, it is a larger company pushing use of EDI onto its smaller trading partners.

If you are implementing EDI in response to a customer mandate, the customer may have contracted with an EDI provider to recruit its suppliers. In this case, that provider will lead you through the process. If you are implementing EDI on your own, you will need to choose an EDI supplier.

Either way, EDI should bring these benefits:

1. Remove costs of manual document exchange.
2. Decrease errors.
3. Maintain a fast and secure way to communicate with trading partners.
4. Move information faster in order to reduce inventories and respond to customers quicker.

Action Steps

The best contacts and resources to help you get it done

Find a vendor that's friendly to small business Unless you have a staff that has expertise in building and running EDI systems, go with a vendor.

I recommend:  Get It Done: Two that target small business include: Sterling Commerce and DCAS Software Solutions.

Find an application that's friendly to your software Reduce the problems of ramping up EDI by starting with a system that's compatible with you already run and know.

I recommend:  Get It Done: Intuit, the maker of QuickBooks, lists several EDI providers that integrate with its popular financial software. Search at the QuickBooks marketplace. Also, Microsoft is adding built-in EDI capabilities to its BizTalk server.

Negotiate your best deal Cost isn't everything, but like anything else, negotiation can lower the price.

I recommend:  Get It Done: Talk to lots of vendors. EDI systems can involve the Internet, or not. They can be custom-designed or off-the-shelf. One company that targets small businesses and offers a demo on its Web site is Covalent Networks. The Small Business Adminstration has pointers on how to structure an EDI deal.

Tips & Tactics

Helpful advice for making the most of this Guide

• Don't resist. Many small businesses still handle purchase orders by fax and phone. This adds expense and is more prone to errors. View an EDI mandate as a positive step toward making your business more efficient.
• How a company pays for EDI transactions varies. You may hear the term 'value-added networks,' which are third parties that generally charge a per-transaction fee and sometimes other fees. Other vendors charge a flat fee. Which model is best depends upon the issues that are most important to you and your partners, such as security, number of transactions and reliability.
• Chill out. Although you may hear a lot of technical jargon about the language used to exchange documents, don't get hung up on this. Think of EDI as an e-commerce program. Set clear goals when working with a vendor and make sure these goals are met. Keep it simple. Serve the customer.