Electronic Data Interchange (EDI)

One IT tool useful for businesses is electronic data interchange (EDI). EDI is the electronic exchange of documents between businesses.

For instance, imagine two businesses that buy and sell from each other on a daily basis. Consider the traditional method of handling this: The company would print the invoice, mail it, and then the receiving company would open the envelope and dispatch it to the accounting department. Subsequently, they would input the information into their system. However, with EDI, the two companies’ computers establish a direct connection. Hence, company A can send an invoice directly to company B’s computer, eliminating the need for paper and delays due to mailing, thus enhancing efficiency.

Study Tip: An EDI is the electronic exchange of documents between businesses. Preventing unauthorized access is key.

When employing EDI, businesses need to remember a few crucial aspects. Firstly, using EDI necessitates strict standards. The information that companies share with each other must be properly formatted, ensuring that both computers can correctly interpret the data. Next, unauthorized access to the EDI system could pose serious risks. Documents exchanged between companies could contain sensitive data, so securing them is paramount. Two ways to achieve this are through encryption and setting up a firewall.