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What is EDI Compliance and Does My Business Need It?

by | Jan 13, 2023 | Blog, Compliance

If your business is growing and you’ve started using EDI to streamline your supply chain, you’re bound to run into the issue of EDI compliance. As a quick refresh, EDI (electronic data interchange) is the standardized electronic communication of documents and transactions between business partners. In today’s age, it’s an essential component of the supply chain, allowing small and large businesses to keep up with their orders and shipments. EDI systems enable companies to track orders, send invoices, signal warehouses, count inventory, and more.

With the growth of EDI in business, large companies (and even some smaller ones) now require EDI compliance from other businesses that want to partner with them. But what exactly does EDI compliance mean?

What Is EDI Compliance?

EDI compliance means that a business meets the EDI data requirements of another company to partner with them. In other words, you must prepare your business’s EDI system to exchange information with your partner in exactly the format they want- or else they won’t do business with you.

A standardized system between business partners is necessary to keep operations running productively, as EDI errors can be incredibly costly (we’ll talk more about that later). Realistically, this means using the same protocols and codes as your partner so that there are no mishaps, such as issuing an order for the wrong product or shipping to the incorrect address.

EDI compliance is about maintaining a healthy and productive relationship between you and your business partner. Becoming compliant can seem intimidating, so here’s a closer look at the process.

How Does EDI Compliance Work

It takes some setup time to become EDI compliant with a trading partner. A business often sends you an EDI requirements document, which outlines the guidelines and steps they require another company to implement before working together. This document usually includes a list of EDI transaction codes, such as an “810 Invoice” or an “850 Purchase Order.” Once these requirements are accepted, the two companies will begin to test the system by issuing an order, shipping it, providing tracking information, confirming delivery, and sending invoices. A business is EDI compliant if all these transactions go smoothly.

It can be challenging to set up your EDI system to become compliant, and that’s why many businesses outsource to an EDI provider. Out-of-house EDI companies can walk businesses through becoming compliant and avoiding unnecessary costs.

EDI Chargebacks

Be careful because even EDI-compliant businesses can make errors. Some companies will even charge fees if their partners fail to meet the requirements specified in their trading agreement. For example, if your deliveries are late, your products are mislabeled, or a shipment is damaged, your business can incur chargebacks to make up for the disruption in operations. These charges can be very costly, so it’s essential to do EDI right.

eVantage Direct can translate your data into a readable and accessible format, allowing your business to achieve EDI compliance with any trading partner. Our services are completely customizable, and no client has such complex needs that we haven’t been able to meet. Contact eVantage Direct to ensure your business’s success in EDI compliance.


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