EDI Becomes Part of Economic Survival

By Harter, Gregory B. | Business Credit, January 1993 | Go to article overview

EDI Becomes Part of Economic Survival


Harter, Gregory B., Business Credit


Electronic data interchange (EDI) is finally being recognized for what it really is: A very powerful facilitator for change in companies whose management is sharply focused on profitability, competitiveness, and survival. There are now some 30 industries in the United States that are heavily involved in implementing EDI to facilitate data transfer processes. Although the technology to pursue EDI is not new, the business processes that are driving its implementation are born of competitive necessity, making financial EDI an integral part of doing business electronically.

We know from success stories of financial EDI implementers that several general observations can be made:

* While many trading partner EDI implementations benefit the customer more than the supplier, the implementation of financial EDI can initially benefit the supplier more if the receipt of cash and remittance information is integrated into that supplier's treasury management and accounts receivable systems. When this is accomplished, staff working on manual cash application tasks can turn more of their attention to working with customers on credit and collection efforts.

* Although float issues may have initially been a point of discussion, some joint work by trading partners has resulted in the recognition of float as a zero-sum game; benefits of reducing labor intensive discrepancy resolutions, improved quality of data, automatic reconciliation of cash and accounts receivable data, no lost checks or stop payments, and greatly simplified bank account reconciliations are all of significantly greater value. These benefits do not come without hard work, of course, but the result is knowing your trading partner requirements much better than you ever have--which I would suggest is of more value that pushing the float point back and forth.

* Cash managers can more productively invest funds or more accurately predict borrowing requirements because of the increased certainty of timing of the actual disbursement of receipt of funds in an electronic environment.

* Some trading partners on the receiving end of the process that experience little or no benefit from financial EDI correlate highly with an implementation that receives funds electronically but continues in some format to receive or create remittance data on paper. …

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