The Economy Digest
Sustainable Finance

Why is EDI a Must-Have Solution for Financial Services Today

Why is EDI a Must-Have Solution for Financial Services Today
Image Courtesy: Unsplash

The pandemic has changed the way financial enterprises work today. And the growing international trade has globalized the financial supply chain – by further strengthening the interdependence between the buyers and the suppliers across geographies. This is where complexities arise and they come in all different sizes, be they differences in currencies, regulations and accounting practices, numerous file formats and communications protocols, and so on. This means only one thing – financial markets have to continuously reinvent themselves to thrive and succeed in today’s ever-evolving market. But then, what’s keeping you from going digital 100%? Is it the security and compliance issue? To remain strong, you must embrace digitization and help your employees and customers adjust to the new ways of working. This is where EDI (Electronic Data Interchange) comes in.

What is EDI?

EDI technology allows the computer-to-computer exchange of business documents in a standard electronic format between different business partners. In other words, EDI simplifies everything for you while meeting all security and compliance requirements. With EDI, you can electronically receive an invoice initiate a payment, and accomplish so much more.

Today, the finance industry is increasingly using EDI technology to improve operational efficiency and reduce transaction costs across the supply chain.

And there is an EDI specifically for the Finance sector known as the ‘Financial EDI’. This Financial EDI enables funds to be transferred electronically between financial institutions – EFT (Electronic Data Transfer). With EFT:

  • Employers can directly deposit payroll cheques
  • Consumer accounts can be directly debited, and
  • Businesses can pay government taxes electronically

Here’s how EDI solution can help you

Automation and reduces costs

EDI’s primary advantage is the automation of the processes related to sending invoices and initiating payments. Thus, by automating some of the crucial financial tasks, your organization can save a great deal of time, money, and employee effort. Not to mention – human errors being one of the major costs that an organization has to own will be put to an end with EDI implementation.

Not just that, automating the tire-some paper-based tasks will allow your employees to focus on higher-value tasks. And since the exchange of data is automatic, it ensures business-critical data is sent on time and tracked in real-time. Plus, it rules out re-work.

Simplicity and easy communication process

The next best thing about EDI is – the standardization of data. EDI makes it super easy for your employees to find the data in no time. Not only that, it simplifies the onboarding process for your customers as well. And enables easy and secure communication and exchange of financial data between you and your customers through secure networks such as SWIFT and so on.

In addition, the automatic generation of sales orders, invoices, shipment reports, and other invoices will make your work simpler and more efficient for both your sales and warehouse team. And with electronic confirmations to ensure receipt of documents between parties, EDI brings transparency to business relationships.

Eliminates manual labor, paperwork errors, and saves costs

Is there anyone who hasn’t come across errors such as illegible faxes, lost orders or incorrect entry of data, etc? Nil! In the end, we are all humans, aren’t we? And errors are a daily part of our lives. Now, this is where EDI can be of use.

As discussed previously, EDI helps you receive an invoice and initiate a payment without manual intervention. In other words, eliminating the paper in payables and receivables flows enables you to reduce days sales outstanding and days payables outstanding, thereby, optimizing your cash conversion cycles. EDI also provides a lower-cost alternative to traditional paper-based payment methodologies, while eliminating errors associated with manual processes.

Not just that, exchanging documents electronically improves transaction speed and visibility while reducing the amount of money you spend on manual processes.

Secure payment process

With manual work processes, the human error involved increases security risks, thereby leaving room for inaccuracies and even loss of data. With EDI in place, processes are automated, and documents are transferred through a secure connection, thus, eliminating errors of all kinds. In sum, EDI ensures secure exchange of internet-based file transfers – while enhancing governance, visibility, and audit controls.

How does it do that? EDI offers advanced security for every transaction by securely distributing data via stringent communication protocols and safety standards. And this decentralized protection system approach helps mitigate the risks of cyberattacks.

Better customer service

When all the business processes flow smoothly with no scope for errors, security mishaps, delay, or miscommunication – this can only mean one thing – happy customers!

Yes, with EDI in place, you can achieve enhanced levels of satisfaction for both end-users. And this means – improved relationships with your existing and new customers.