Electronic Data Interchange (EDI) is the process of sending documents (e.g. purchase orders, invoices, etc.) from one company to another in a predetermined which thus allows it to be automatically entered into the receiving company to be processed. This process minimizes human error and therefore makes both companies more efficient and also reduces costs. Both companies will need to use EDI translation software, communications software and data transfer hardware (VAN, leased line, or EDI over the Internet), and a legal agreement between the two companies on how to resolve the issues. The sending company will use the EDI translator to convert its document (e.g. purchase order) into EDI compatible data, and then use the communication software to send to the receiving company via VAN, direct line or EDI via the Internet. The receiving company will then receive the data via the communication software, send it via the EDI translator, then it will be in the company data format to create the order. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay There are many benefits with companies implementing EDI into their companies. Some of these benefits include accuracy, better customer service, better inventory management, reduced costs, and better cash flow (faster payments). Companies will have more accurate accounting records thanks to the reduction of clerical errors. Companies will avoid the human error factor as data will be transferred directly from one company to another. Another benefit will be improved customer service because businesses will be able to process orders faster. Additionally, businesses will be able to better manage their inventory. The time required for inventory inventory will be reduced and companies will be able to minimize inventory. There are many benefits with companies using EDI, but there are some challenges that come with the company's ability to verify and control the integrity of the data. I believe that for each of these challenges there are controls in place to ensure the integrity of the data and still have the ability to verify the information. Businesses typically have human signatures on business contracts, purchase orders, receiving documents, etc., but with EDI there are no longer human signatures to verify transactions that have occurred. Therefore, there must be a way to verify that the identity of the data sent is authentic and authorized. The control measure in this sense occurs through the identification of the machines that send the data (digital certificates) and non-repudiation, which verifies that the document was sent or received by the recipient. A notification may also appear when any unauthorized machine tries to access the data. The second challenge I would like to address concerns data integrity and confidentiality. Companies must be guaranteed that the quality of the data cannot be altered during transmission and that unauthorized users cannot access it. Control mechanisms for this issue include the use of encryption and the use of passwords/IDs for users. The final issue I would like to address related to difficulties in data processing in EDI is auditability. Traditionally in accounting we use an audit trail which is simply a paper trail of documents that allows us to track transaction activity. When businesses use EDI there are no paper documents, so how can they verify transactions? To overcome this problem the system must provide electronic audit trails to verify past transactions, which they can do. AND.