Electronic Data Interchange (EDI) provides many benefits to businesses; the most significant benefit is cost savings. EDI is the electronic transmission of business documents including invoices, Advance Ship Notices (ASNs) and purchase orders between two or more organizations, eliminating the need for manual data entry. The process can be done in four easy steps using EDI:
- The document is extracted from the sender’s internal business system.
- The document is then converted into an EDI format.
- The document is transmitted to the recipient electronically.
- The recipient converts the EDI data into a format usable in their internal business system.
All this is done automatically by your established EDI network.
Cost Saving Areas with EDI
ASNs/EDI 856: ASN’s can significantly reduce processing time, reducing costs for manual receiving. By sending and receiving ASNs via EDI you can ensure your customer shipments are received accurately and prepare for your own upcoming shipments. Without the use of an ASN it costs approximately $78 to process a single shipment, but with the use of EDI and ASN the cost is reduced to 2 cents per order!
Order Processing: EDI can reduce your order-to-cash time up to 50%. You increase customer satisfaction and reduce processing costs by reducing labor costs.
Financial and Transaction Cost-Savings: By taking advantage of EDI 810’s (invoices) you have even greater opportunities to reduce your costs. While there isn’t an exact figure, various experts like Sterling Commerce have found that the average cost of a manual invoice can range anywhere from $12 to $30. By automating invoicing, the cost can be reduced to just $3.50! For an organization that processes up to 10,000 invoices per month that can translate to huge cost savings! When calculating your costs to process your invoices, consider these factors:
- Transit time for emailed or mailed invoices.
- Hours spent manually reviewing and reconciling each invoice.
- Hours spent finding and correcting data entry errors.
- Cost of handling and archiving invoices.
- Lost discounts or late fees from slowly processed invoices.
- Lost hours of productivity for value-added work (instead of data entry).
Once you review these factors, you’ll be able to determine the true savings you would experience with EDI. You’ll reduce costs not only in labor but supplies as well. It will also speed up your cash flow! To learn more about e-invoicing, check out our article.
Chargebacks: Chargebacks can be very costly to an organization. These fees are financial penalties for non-compliance with your customer’s requirement. Some of the most frequent causes of chargebacks are:
- Early/late delivery
- ASN/EDI violation
- Improper labels
- Purchase order violation
- Shortage of product
When your documents are transmitted and translated in real time without human intervention, it increases data accuracy, potentially reducing the frequency of chargeback fees from customers. To learn more about avoiding chargebacks, click here.
Error Correction: You’ll save hours that would typically be spent searching for lost inventory or manually searching for and correcting errors within your database. The data transmitted within the EDI files will transfer automatically to the proper fields, eliminating manual entry where the errors occur. With EDI you can save substantially in lost labor hours in correcting errors each year!
Trading Partner Onboarding: EDI stretches across a number of industries and once you complete an initial EDI setup, doing business with multiple trading partners becomes easier and requires less time, which allows you to begin generating additional revenue faster. Click here for a list of companies already utilizing EDI. If you are doing business with any on this list, but aren’t exchanging EDI with them, now is the time to consider adding them and realizing the cost savings!
Since 1991, Data Communication Solutions’ (DCS) clients have enjoyed the benefits of our expertise in EDI. Every one of our EDI Specialist is an expert in service and compliance issues related to EDI. Partner with DCS as your Solutions Provider and learn how our DCS Consultants can help you simplify your EDI, reduce your costs and risk! Contact Data Communication Solutions today.