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Ways to Become EDI Compliant and Avoid Chargebacks

A resilient and pliable supply chain can handle unexpected risk events, respond and bounce back quickly to potential disruption, and uphold financial performance and customer-level services. Resilient supply chains can mitigate chargebacks while rapidly meeting the customers’ and market’s shifting demands.

Understanding the Causing of Chargebacks

Many big enterprises face large volumes of chargebacks that affect the bottom-line performance, leaving customers dissatisfied. Startups and chargebacks can result in real sales and opportunity loss. But why do we have chargebacks?

It is caused when you put incorrect labeling, poor packaging, late shipment delivery, wrong product type/model, incorrect order number, etc. These chargebacks are the reason for loss of efficiency and tracking them down can help companies manage them better. 

The causes for chargebacks are usually hidden in the places you least expect to find. Hence continuous monitoring and then planning chargeback defense strategies company wide can help to run their business efficiently. 

Types of Chargebacks 

EDI chargebacks can be of many forms. The EDI 856 ASN (Advanced Shipping Notice) is an EDI document that is also the riskiest transaction. 

ASNs were developed to track and pack information ahead of delivery, which also made it the key component of EDI. The most common element in ASN is the purchase order number then the ship notice number and the location where the product will be shipped. 

Some common reasons, apart from ASN errors, that B2B customers might execute include

  • Wrong carrier
  • Shipments arriving early or late
  • Missing key specs
  • Orders filled at an inappropriate rate
  • Product delivered to the wrong location
  • Incorrect paperwork

Defense Strategies for Chargebacks

To reduce the chargebacks, you must undergo three steps – Discover, Analyze, and Tackle.

Discovery – This phase is meant to identify the root cause as well as to detect future success/failure rates. Understanding the root causes can help companies prevent chargebacks from reoccurring while focusing on performance improvement initiatives at scale.

Analysis – This phase is meant to figure out the failed orders instead of what should have actually happened. It also gives you concrete numbers that help in further planning of the standard operating procedures and executing defense strategies. 

Integration – After tracking and analyzing the root cause, it’s time to adopt the right technology to reduce the chargebacks. B2B integration and automation can streamline the supply chain and provide accurate order data. Proper training will ensure proper PO filling as per specifications and highlight the importance of compliance. 

Compliance gives you the authority and ability to exchange business documents while meeting the trading partner’s requirements. Complying with electronic data interchange is crucial for establishing better relationships with trading partners while enhancing financial opportunities. 

Understanding EDI Compliance

In order to accurately and safely exchange data and operate them effectively, EDI compliance is vital. EDI has universal standards set for companies to follow that also help them lead to efficiency and fewer mistakes while using different protocols. Without EDI, companies would have been spending time deciphering the codes sent by their trading partners or could have misunderstandings about the code & end up providing the wrong service or product. 

Complying with EDI eliminates inaccuracies and inefficiencies while greatly reducing the risk of miscommunication and complications.

When asked about the lost revenue in 2020 due to poor integrations 66% respondents lost upto $500,000. Moreover, 8% lost between $500,000 – $1,000,000 in 2020 while 7% lost the same in 2019. 

EDI Compliance Requirements

Companies observe different requirements for different trading partner setup and maintenance. Walmart, one of the biggest EDI users explains in order to be EDI compliant for all partners, you would need – 

  • Ability to exchange basic EDI document set
  • Timeline for EDI data testing
  • Necessary Connections
  • Functional acknowledgment expectations

With EDI compliance you can build solid trusted relationships with the trading partners and the customers. 

Benefits of EDI Compliance

• Lower Financial Penalties

EDI compliance gives better control of cost while reducing the overall expenses of the business. Chargebacks or penalties are usually issued by trading partners hence a company can have multiple chargebacks, lowering the vendor’s profitability. 

Meeting EDI compliance standards can lower the potential costs as it ensures you meet your trading partner’s requirements.

• Enhanced Financial Opportunities

EDI compliance opens the door to bigger financial opportunities by giving you the chance to sell your products and services on a bigger platform. EDI compliance can significantly reduce material costs as you won’t have to pay for envelopes, postage, and paper cost & reduce administrative expenses. 

EDI compliance comes with cost-effective labor. You can seamlessly automate manual tasks, such as filing, reviewing documents, or entering data into forms. This also reduces the human error and costs that come from them. 

• Better Relationships 

One of the biggest benefits of EDI compliance is a better relationship with clients and trading partners. You can seamlessly communicate with every business partner when you have the right EDI implemented. The fast and accurate information transmission allows you to meet the partner’s as well as the customer’s expectations. 

EDI compliance can also help you align with the changing market needs. With the ability to quickly adapt to market needs, companies can streamline their operations and reduce the chance of order disruptions. 

Additionally, you can improve your customer service by increasing order accuracy and sharing more information with customers. Order accuracy allows the company to deliver the product at a much faster rate while ensuring that the customer gets exactly what they ordered.

• Improved Accuracy and Efficiency

An organization abiding by EDI compliance standards can enhance its operational efficiency. The automated transactions of EDI documents free up the company’s time and focus on more critical tasks.

With compliant EDI implemented, companies can reduce the paper-based operations and significantly reduce the time to send, process and fill out the documents. Along with increasing efficiencies, the electronic document can improve accuracy with the help of transaction sets.

EDI compliance gives you visibility over the supply chain and inventory so you can process orders faster. EDI gives you ample data that can help to make informed decisions and beat the competition in no time. 

Become an EDI Compliant

With these benefits, you might be interested in EDI integration with compliance. Follow these steps to have EDI compliance.  

• Collaborating with an EDI provider

To handle the EDI processes, you do not need to hire a complete IT team. Instead collaborating with an expert EDI-managed provider can be of much assistance. They can provide the right and compliant software solution that can help you meet –

  • Integration with third-party apps, like ERP.
  • Maintain standards
  • Trading partner configuration
  • EDI mapping
  • Sending and receiving documents
  • TXT/CSV/XML translation

• Understanding the Needs of Partner

It is absolutely important to understand and meet the expectations of your trading partner to avoid chargebacks. Finding out what documents they will need and which documents they will be sending can help a lot. Another method is by reviewing their need for communication protocols, EDI standards, and other specifications. These factors will help you ensure that you and your trading partner are on the same page while improving relationships and better complying with the standards. 

• Testing the EDI Solution

Before investing and implementing an EDI compliant solution ensure that you have thoroughly tested it. By testing means, you have checked the functionality and working operations of the software. Your EDI solution must be able to exchange documents correctly in the right format with the trading partners. With everything in place, you can be EDI compliant and ready to begin working with trading partners and customers seamlessly.

• Cloud-based EDI System

Other than collaborating with a managed services provider, you can opt for a modern cloud-based EDI system. You can get Cloud integration that can help you design, develop, operate and optimize critical ecosystem processes. You can always mature the integration solution on your terms and time, making it more flexible and customizable to grow as your business grows.  

In a Nutshell –

Prevent your business from exorbitant chargebacks or penalties while developing a stronger and healthier relationship with the trading partners and customers with the help of compliant EDI solutions. With optimal research and testing of the EDI compliant solution, your company can –

  • Reduce time to connect with new partners
  • Avoid processing delays
  • Remove ineffective EDI testing
  • Eliminate EDI errors
  • Lower the need for manual EDI maintenance.

So, choose a reliable EDI managed partner to harness EDI compliant solutions and streamline your business processes that can give you impactful outcomes. 

Marco Polo
Marco Polo is the admin of sparebusiness.com. He is dedicated to provide informative news about all kind of business, finance, technology, digital marketing, real estate etc.
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