The Business Operator’s Introduction to Processing EDI Invoices
by The Ottimate Editorial Team
With so much work to do, finding efficiencies is essential for any business operator trying to keep their head above water. Even small improvements in repeated tasks that involve paper can add up to big time savings in the long run. In the world of document transfer, electronic data interchange (EDI) has been solving these inefficiencies for decades. Let’s dive into processing EDI invoices.
What Does EDI Mean?
An electronic data interchange is an automated transfer of data between two computer systems using a fixed data structure.
Think of it as a way for two computers to share business documents in a secure, automated way. No human needs to intervene in the data transfer: it just exports from one system and pops into another.
EDI is not a specific technology. It’s not owned by anyone. Though standards have been proposed by official bodies like the UN and the National Institute of Standards & Technology, the term “EDI” encompasses a number of different protocols — some of which predate the Internet. (HTTP is itself one EDI protocol.) All of these methods of data transfer have one thing in common: they structure data so that both computer systems know exactly which information is which.
How Can Processing EDI Invoices Save Me Time?
Pretty much any process that involves paper documents can be streamlined with EDI. To take the example that many Ottimate customers are familiar with, let’s see how a restaurant invoice workflow works with EDI.
Processing Paper Invoices
When a vendor delivers your order, the driver hands you a grubby, crumpled paper invoice. Back in the office, you enter the invoice into Ottimate by either snapping a photo with the mobile app or scanning it in.
Both processes take time and even include a degree of risk. What if the paper is too grubby? What if the handwriting is illegible? What if you lose the invoice in the first place? If you’re not using Ottimate and have to key in the invoice details yourself, that process is even more slow and error-prone.
Processing EDI Invoices
Electronic invoices remove the need for human interaction. When the vendor’s system generates an invoice, the data appears in your invoice management system. All the data shows up exactly how the vendor’s computer system exported it — no need to type, snap, or scan.
With a PDF invoice, even if it’s completely legible, Ottimate needs to transcribe all the information. With EDI, it’s the other way around: Ottimate ingests the data directly from the vendor and goes the extra mile to generate a beautiful, human-readable PDF invoice image.
The Benefits of Processing EDI Invoices
Processing EDI Invoices Is Fast and Accurate
Paper invoices require a lot of human intervention to be routed, approved, and paid. PDFs are much faster and easier to access, but they still need to be uploaded into your invoice management system.
Documents transmitted by EDI are, in a way, native to your invoice system. With no human touches necessary, they just appear correctly formatted and ready to be processed.
They’re also more accurate. With EDI, the lack of manual data entry, handwriting, and spotty scans ensures that what you see in your invoice system is exactly what came from the vendor.
EDI Invoices Are Easier To Store and Audit
Storing paper invoices requires space-taking filing cabinets. In a crowded office, maybe in the back room of a restaurant, this is no trivial matter.
Searching the invoices requires going through those filing cabinets. Even if you know what date and what vendor you’re looking for, you still need to brave paper cuts and time-consuming filing to get to the right document. If you don’t know quite what you’re looking for — or if you’re trying to piece together a story from line-item data such as the movement of a certain price over time — best of luck to you. The process will take a lot of valuable time.
EDI invoices solve both of these challenges. Not only are they far cheaper to store, but they are instantly searchable, making audit readiness a snap.
Processing EDI Invoices Can Be Automated
Because we’re dealing with inputs into a computer system, EDI invoices can be made to trigger certain behavior to take place. Some vendor systems can automatically generate an invoice the moment the system receives a purchase order; on the customer side, an invoice can be routed for approval to specific parties based on the data on the invoice.
In Ottimate, for example, Advanced Approval rules can send invoices over a certain dollar amount to certain approvers. The same goes for certain types of corporate invoices (as opposed to store-level) and so on.
With the ability to trigger specific courses of action, EDI invoices give you not only real-time visibility into your spend, but real-time control over it as well.
What’s the Difference Between an EDI Vendor and a Vendor That Uses EDI?
EDI is a technology of data transfer. A vendor that is compatible with an EDI workflow is a vendor that has a system set up to receive purchase orders, send invoices, accept payments, and all manner of other document transfers, electronically; i.e. without having to email or mail a physical document.
An “EDI vendor” is different. An EDI vendor is a company that sells software, tools, or services that create the capacity to transmit documents via EDI.
As you’ll see in the next section, there’s actually quite a bit that goes into it.
How Do I Get My Vendors Set Up on EDI?
For as easy as EDI makes your workflow, getting set up on it is surprisingly challenging.
It’s a process that requires digital permissions from multiple parties, correctly adding account numbers to databases, choosing an EDI protocol, and other technical steps. It’s a massive human effort requiring the handling of complex files and email exchanges, in addition to complex contracts.
Ottimate does have the capabilities to handle this complexity for both customers and vendors and is developing tools and features that will make this process smoother and more efficient.
Ottimate makes EDI a managed service and can help you get these connections to your vendor set up as part of our onboarding process.
Changing the History of EDI
For a technology that first emerged in the ashes of post-WWII Europe, electronic data interchange has stuck around an admirably long time. It’s founded some of the most important channels of communication and automation in our modern world — and with Ottimate it’s become even more accessible to you.