EDI Invoice – Revamp Your Company’s Billing Systems

Electronic data interchange (EDI) is the computer-to-computer exchange of vital business documents and information in a standardized format between two companies. Enterprises adopting this software technology to execute their business transactions are individually known as trading partners. It replaces the manual processing of paper-based commercial documents. However, they need to reach a mutually acceptable agreement on which EDI messaging standard to use. Generally, most companies in America choose to adopt the ANSI ASC X12 standard as it is versatile. Then, they need to choose the right secure transmission protocol to exchange business documents and information. They can select any one of the following:

  • File Transfer Secure Protocol (FTSP),
  • Hypertext Transfer Protocol Secure (HTTPS),
  • Odette File Transfer Protocol (OFTP),
  • Secure File Transfer Protocol (SFTP),and
  • Accountability statement (AS) 1, 2, 3 or 4.

What is an EDI invoice?

The process of receiving, executing, and transmitting customer invoices using electronic data interchange technology is known as EDI invoicing. These business documents are assigned a transaction code 810 under the American National Standards Institute (ANSI) Accredited Standards Committee (ASC) X12.EDI invoices and generally contain the following information:

  • Date of generating the customer invoice,
  • A unique computer-generated invoice number,
  • The price, quality, and product description the buyers specify in their EDI 850 purchase order,
  • Total sales value which the purchaser has to pay for acquiring the products,
  • Taxes chargeable and discounts applicable on the sales value,
  • Payment terms and conditions which the companies agree to, and
  • Date of shipment of the products to the end-user.

How do companies normally generate their customers’ EDI invoices?

Companies adopting electronic data interchange technology generate an EDI invoice from their customers in the following manner:

  • The enterprises’ EDI software platform receives a purchase order (EDI 850) from their customers,
  • The EDI solution transmits the information in this purchase order to their enterprise resource planning (ERP) platform,
  • The ERP checks for the availability of products the purchase order specifies in its inventory and warehousing module,
  • The ERP platform then generates a message to warehousing employees to pack and ship the products,
  • Simultaneously, the enterprise resource planning (ERP) platform generates its customer invoice,
  • The ERP platform then transmits data in this customer invoice to the EDI software solution,
  • The EDI software generates an EDI invoice from the ERP version and dispatches it to the customer, and
  • The EDI software solution then generates an EDI 820 remittance advice on realizing the payment from the customer.

The proper processing of the EDI invoice companies raise their customers allows them to automate their billing system. This form of computerized invoicing enables them to significantly increase the number of customers’ bills their businesses execute. Moreover, top officials of these enterprises even notice a considerable decrease in avoidable clerical errors.

However, the EDI software solution the companies operate should integrate easily into their IT infrastructure. Moreover, the platform should be compatible enough to embrace the latest technology. These include artificial intelligence, machine learning, business analytics, and robotic processing automation. Above all, the price of installing and operating this EDI software should be with the companies’ financial budget.