October 29th, 2020
If you’re tired of logging in to tens (or maybe even hundreds) of your customers’ supplier portals so that you can send your invoices and get paid, you’re probably thinking: There must be an easier way. And you’re right. It’s called EDI integration.
In a basic sense, EDI integration enables you to send your invoices without logging in to a single supplier portal. With a fully integrated EDI system, you create the invoices in your ERP or accounting system and, well, that’s pretty much it. Your previously cumbersome EDI workflow is no longer separate from your usual tasks.
How Does EDI Software Integration Work?
Let’s say you have 100 customers and a fully integrated EDI system with your SAP S/4HANA ERP. Good for you—that means you don’t have to log in to 100 different supplier portals to send your invoices. Instead, your EDI software will act as a seamless extension of your ERP environment.
For each invoice, it doesn’t matter to which customer you are sending it to, how you are sending it, or in which format it is sent. EDI integration means that once you enter the invoice into your ERP, your work is done. The EDI software is built in; it’s fully integrated with your ERP. All processes necessary in transforming the invoice from its original format to that of your customer’s required format are executed in the background. You won’t even have to think about it.
Types of EDI Integration
A fully integrated EDI system is invisible to non-technical users (i.e., accounting), so the type of EDI integration doesn’t matter all that much once everything is up and running. Prior to that and in terms of ongoing maintenance, however, it’s a pretty big deal for the in-house team that will manage the system (i.e., IT) on a daily basis. It also determines how long the implementation process will take.
EDI software integration with an ERP is typically the easiest part of EDI integration—especially when standard connectors are involved. The other side of EDI integration goes back to the who, how, and in which format statement mentioned above. Let’s start with the who.
If you have 100 customers, it’s possible that each one of them requires you to send your invoices in a different way. As you can imagine, there’s a lot of work that goes into making this happen. The amount of work depends on the type of EDI integration required per customer, as explained below:
Direct EDI Integration
This implies a direct connection between you and your customer. This means that a map is required to ensure that data can be transferred from your ERP to theirs (and vice versa) without manual intervention. And example of this would be that your customer requires you to send your invoices—which must contain 3 unique fields that are not required for any other customer—in X12 format via AS2 connection.
If all 99 of your other customers also have special invoice requirements and likewise require a direct EDI connection, the initial setup can be quite time consuming. Not to mention the ongoing map updates which are usually handled by your internal IT team in a typical SaaS scenario. To save yourself time and to start reaping the benefits of a fully integrated EDI system on the short term, check that your service provider works with canonical maps to speed up the process.
Indirect EDI Integration
This integration method replaces any number of direct connections (and, therefore, map creations) with a single network connection, the most common of which are open networks and value-added networks (VANs). Both work similarly, although we should mention that VANs are pretty much a thing of the past considering the outdated pricing structure and general consensus that the Internet is secure.
Anywho, a popular example of an open network is the Peppol network. If your customer accepts (or requires you to send) invoices over an open network, all you have to do to ensure seamless EDI integration for yourself and your customer is find a service provider who can connect you to the network, like TIE Kinetix. From there, you can immediately do business with anyone else in the network. Pretty cool, right?
Hybrid EDI Integration
This form of integration sounds more complex than it actually is. In sum, it’s a combination of direct EDI integration and indirect EDI integration—nothing special. In fact, most companies achieve EDI integration through a hybrid approach. For suppliers, it’s not necessarily by choice; it fully depends on your customers’ EDI requirements.