FINANCIAL EDI CHANGING THE CASH MANAGEMENT BUSINESS
What is Financial EDI?
Financial EDI (FEDI) is the computer-to-computer exchange of payment and payment-related information between companies using a standard format. Unlike other forms of EDI, such as exchange of price quotes or purchase orders, financial EDI always involves a bank because a financial transaction (a payment) is being effected. Due to this fact, a new business opportunity now exists for banks in the cash management industry.
Who Uses Financial EDI?
In the most general sense, the marketplace for financial EDI consists of two distinct segments.
o Originators - companies or government agencies who electronically initiate payments and the associated remittance information to their suppliers using the standard EDI format.
o Receivers - companies and government agencies who electronically receive payments and the related remittance information using the standard EDI format.
In financial EDI, a bank acts as the financial intermediary between originators and receivers for both the actual payment and the associated payment data.
How Does Financial EDI Work?
In the classic EDI scenario, the following actions take place:
o The buyer, or originator, electronically extracts payment information from the company's accounts payable system,
o Formats the data into an EDI standard (ANSI 820 transaction set),
o Transmits an ANSI 820 file to the company's bank,
o The bank then takes the 820 data and puts it into the format necessary for it to be carried through the Automated Clearinghouse Network as an ACH transaction,
o The ACH network then delivers the payment and data to the seller's bank. The bank credits the seller and,
o Electronically transmits the payment-related information in the 820 format to the seller's accounts receivable system where the payment is then posted automatically.
Benefits of Financial EDI?
By using financial EDI, all the steps described above are done electronically with the payment and related information exchanged from one computer system to another, with no manual intervention. Today, of course, most payments are made by check with a hard copy of remittance information attached. The manual processing which results by using paper is less efficient, less accurate, and most importantly, more expensive than electronic processing. This is why financial EDI is a rapidly growing way of doing business.
Benefits of Financial EDI for Banks
For banks in the cash management industry, offering financial EDI services is one way to defend the revenue generated by current check business, whether it is in disbursements or collections, since over time, a great many of these payments will be converted to electronic EDI transactions. However, because of the investment required, not every cash management bank will be an EDI player. Electronic processing. This is why financial EDI is a rapidly growing way of doing business.
By Ken Kinlock at firstname.lastname@example.org
EDI Roll-out is my favorite area of concentration. Would like to pass on some issues/concerns from a company just getting into the EDI arena:
"My company is in the process of getting EDI up and running. We plan to do extensive parallel testing with our first 5 trading partners to ensure everything is working properly.
I was wondering how long it would take to start rolling out other trading partners after that.
Here are the factors to consider:
-We're going to receive 810 invoices from our vendors through EDI and possibly other documents.
-We will have already have set up 5 initial trading partners before attempting to roll out other partners.
-EDI is new to me and the rest of the employees in my company.
Is it realistic to think that we could roll out one vendor per week for 3 weeks? And then 2 per week for the next 8 weeks after that and finally advance to 3-4 per week?"
Yes, it is "possible". However, you have numerous unknowns that will impact your ability to get it done.
- Your EDI experience is admittedly slim, making it difficulty to respond appropriately to issues that arise. And there will be a lot of them, happening quickly.
- You have no control over your trading partners. You may call them all and let them know you'd like to turn them on.
However, many trading partners require a testing cycle and simply not have the time to slot you in immediately.
Also, some Trading partners require a "lot" more work than others.
- You have not indicated how many of "your" folks would be involved in the effort. This is actually quite a bit of work, with a great deal of coordination and details that need to be managed.
- You have not indicated if you have all of the affected business groups in your organization prepared and ready to assist. Implementing EDI is not just a technical endeavor. It requires understanding, buy-in, and support from all of the groups that will be impacted.
See the full article on EDI Roll Out
See my other blogs
See other blogs about EDI
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Payment automation and unintended consequences
"The Payoff" and, more generally, ec-bp, advocate automation and related supply-chain efficiencies; our general attitude is that "trimming the fat" is always a good thing. That's why we explain the latest techniques in EDI (electronic data interchange) and ERP (enterprise resource planning), and how to make the most of them.
There's a "de-skilling" or "deprofessionalization" aspect of this that worries us, though. It will take a bit to explain.
The JWH EDI Services Electronic Commerce Messaging System may be a right for you if you already have an EDI translator, EDI personnel, or do your own mapping and only need EDI VAN communication.
The power of our global EDI network is available on your server, your cloud platform or your application.
Move past the ancient VAN technology. JWH EDI Services Electronic Commerce Messaging System will bring your EDI operation into the 21st Century.
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ec-bp.com The Forum for Supply Chain Integration
ec-bp was established in 2005 as the advocate for lowering the barriers to the adoption of EDI, and our email newsletter has been published every month since that time. Our focus has expanded beyond EDI to encompas the full gamut of supply chain practices and technologies. In addition, our readership has grown to become the largest of any similarly focused publication, and has expanded to include more than 90,000 professionals involved in nearly every aspect of the supply chain.
Today’s supply chain is more than simple transport of EDI documents. The complexity of maintaining compliance with trading partners, managing the ever increasing amount of data, and analyzing that data to drive constant improvement in processes and service take supply chain professionals far beyond the basics of mapping EDI documents.
What is EDI?
Blogs about EDI and eCommerce
EDI with the Government
Electronic Commerce Communications Providers
EDI and EC Vendors
EDI Project Management
History of EDI
Unique Global Identity for EDI Messages
Who wrote all this good stuff?
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Back in the old days, you placed orders with your supplier by phone, fax, mail, and by walking into their store. They entered your order into their system, picked and delivered your products, and mailed you an invoice. Your AP clerk took the invoice, did the 3 way match, put it in the stack to be paid, and you mailed a check at the end of the month.
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What is a Social Supply Chain?
Social supply chain is using "social media technology" all across the entire supply chain : from supplier's suppliers to customer's customers. It means integration of social media technologies (collaboration, sharing) to connect and encompass the participants across the whole supply chain.
The customer-facing side of companies is getting busier. Customers use social media to connect with their peers from a marketing standpoint to promote and advertise their services and capabilities. Social media is now particularly important in customer service environments. Consumers are able to communicate with customer service departments through Twitter and Facebook.
In the supply chain, companies have begun using social media to work with suppliers, vendors and customers. As an example, they can have discussions on issues and arrive at a concensus.
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