The future of eInvoicing: To EDI or not EDI?

By Richard Manson, CloudTrade

Organisations looking to implement EDI for the first time need to consider the challenges associated with this legacy approach to electronic trading. And those looking to upgrade should think twice before throwing good money after bad.

EDI has been around since the 1970s and in that time, service providers have often over-promised and under-delivered. This hasn’t changed. Clients are promised the earth, but those who adopt EDI to streamline their document processing are often disappointed. On-boarding trading partners to EDI can be a challenge[1].

The process for organisations to onboard their suppliers to EDI is frustrating and cumbersome for all involved. The main problem for a supplier is that they have to change their systems and infrastructure in order to support EDI. It takes time, effort and budget, since it requires technical skills to make it happen.

In order to understand the challenges, it’s worth first understanding the process that a supplier needs to go through when setting up an EDI connection:

  1. EDI service provider contacts supplier. The relevant contact often resides in credit control, so is unable to make it happen immediately.
  2. They have to log a request with their IT department to update their finance system and infrastructure. This means they require a compelling business case, which must be submitted to management.
  3. If successful, they obtain sign off from the relevant decision-maker.
  4. They then wait for changes to be made to the finance system and infrastructure, before going live.

This process requires oversight from multiple teams within the supplier’s organisation, including credit control, ERP, IT and infrastructure. Often, third party outsourcing providers are involved in the picture, too. This means the EDI vendor and the end client are forced to treat every single connection as a full-blown project. No wonder the process is normally measured in months, rather than hours. 

EDI service providers might have good intentions, but this approach inadvertently causes unnecessary friction between buyers and sellers. It can take months to connect new trading parties and get electronic business documents flowing. This is a problem, causing delays and lacklustre adoption of EDI amongst suppliers, since only those with high transaction volumes and the right technical skills can justify coming onboard.

It doesn’t need to be this way. Ultimately, receiving organisations just want high quality transaction data automatically uploaded into their systems so they can process business documents such as invoices quickly and accurately. Using CloudTrade[2], it’s as simple as sending a PDF invoice via email. Our technology maps the data carried in the PDF to the file structure required by the receiver. It really is as simple as that.

When you compare this low-maintenance onboarding approach with that of EDI, the difference is stark:

  1. Supplier receives an email requesting that invoice is sent via email as a PDF.
  2. Request is received by credit control clerk and the invoice is emailed to the relevant address.
  3. CloudTrade converts the PDF into the relevant EDI or XML structure with 100% accuracy and delivers it directly into the buyer’s system.

There is no business case required, and no IT spend. The supplier simply has to flag their customer marker records to ensure invoices are sent to the buyer in the correct format.

In recent years, the trend has been away from traditional EDI and towards more sophisticated and non-disruptive forms of data acquisition. Some suppliers – particularly those serving the public sector – are being encouraged to implement some of these other approaches by government clients. The proliferation of PEPPOL[3] looks set to accelerate this trend.

And yet, adoption of EDI remains widespread. This isn’t necessarily a bad thing, but the way EDI is accessed is all too often inefficient and wasteful. To deliver on the promise of EDI and reduce friction between buyers and suppliers, we need to focus on technologies that integrate seamlessly with existing finance systems.

Put simply, we need to make it easy for suppliers to come on board. And that means removing the barriers for them to trade electronically by embracing intelligent data acquisition technologies.

Richard Manson is Director and co-founder of CloudTrade, a UK e-invoicing specialist.

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