Electronic Data Interchange (EDI) for Small Business

Business.com / Financial Solutions / Last Modified: February 22, 2017

Electronic Data Interchange (EDI) gives businesses a secure, electronic, point-to-point connection to exchange documents — ...

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.

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.

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.

Negotiate your best deal

Cost isn't everything, but like anything else, negotiation can lower the price.
structure an EDI deal.
  • 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.

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