Invoice software for Hong Kong

EDI Invoice in Hong Kong

EDI stands for Electronic Data Interchange and an EDI invoice is when the seller sends an electronic invoice in an EDI standardized format to request payment. This requires no human intervention in the main process as it is a computer to computer transfer of the invoice information. Both the seller and buyer will need to have EDI software for this kind of execution of transactions. In addition, both businesses must use a common format for their electronic documents. Following will be a discussion on how the EDI invoice works.

How Does an EDI Invoice Work

Here are the steps on how EDI works:

  1. In the first step, the seller prepares an invoice in their internal sales system. To create an invoice, basic information such as quantity, rate, product description, and other essential information for invoice creation is required.
  2. The seller’s internal sales system then converts the invoice to an EDI format using an EDI translator or transformation software.
  3. Since there can be different EDI formats, the EDI formats for both seller and buyer must be compatible to encode and decode information that is sent or received. Commonly used EDI formats include ANSIX12, EDIFACT, Tradacoms as well as others.
  4. The invoice in EDI format is then transmitted to the buyer’s system. Communication protocols such as HTTPS, SFTP and AS2 must back this transmission.
  5. Once the message is received by the buyer’s system, it is converted to a format compatible with the internal system. The invoice is further processed in the buyer’s internal system for payment approval and further consideration.

As seen, the flow of information takes place electronically without manual intervention and this inevitably helps to minimize error and allows the streamlining of the overall billing and collection process.

Advantages & Disadvantages

The next table displays the advantages as well as the disadvantages of the EDI invoices:
Advantages Disadvantages
Manual interventions are reduced when communication takes place from computer to computer. Hence, process efficiency is enhanced, leading to fast process execution and cash collection. Implementing and maintaining an EDI system is a complex idea involving IT resources, which may not always be feasible.
The cost of paper and other administrative hustles is removed when invoices are transmitted electronically. Hence, it leads to higher profitability. The seller and buyer's data formats must be compatible with the EDI system and format. Any mismatch in the systems’ compatibility may lead to delayed transmission.
EDI systems can be connected with ERP software which helps in the seamless flow of the information. There is a heavier dependence on technology when using EDI invoices. Even small bugs in the process may lead to heavier interruptions.
EDI helps with streamlined audit and compliance as all information can be traced easily. Further, it leads to improved accuracy and enhanced communication. Both seller and buyer need to agree on some aspects of transmission when using the EDI system. For instance, both must agree on transmission protocol and message format and ensure the ability to transmit EDI messages in their ERPs or implemented systems.

Invoicing tools for Hong Kong: