Converting remittance information to electronic form can result in very large records. Members of the ACH system are required to accept and process only EFT formats limited to 94 characters of data-a record size sufficient for only very basic messages. Not all banks in the ACH system support the ANSI standard format for remittances, ANSI 820. In such cases, remittance information must be sent to the seller by separate EDI transmission or conventional mail. The seller must then implement separate procedures to match bank and customer EDI transmissions in applying payments to customer accounts.
Recognizing the void between services demanded and those the ACH system supplies, many banks have established themselves as value-added banks (VABs) to compete for this market. A VAB can accept electronic disbursements and remittance advices from its clients in any format. It converts EDI transactions to the ANSI X.12 and 820 formats for electronic processing. In the case of non-EDI transactions, the VAB writes traditional checks to the creditor. The services VABs offer allow their clients to employ a single cash disbursement system that can accommodate both EDI and non-EDI customers.
EDI Control
The absence of human intervention in the EDI process presents a unique twist to traditional control problems, including ensuring that transaction are authorized and valid, preventing unauthorized access to data files, and maintaining an audit trail or transactions. The following techniques are used in dealing with these issues.
Transaction Authorization and Validation
Both the customer and the supplier must establish that the transaction being processed is to (or from) a valid trading partner and is authorized. This can be accomplished at three points in the process.
1.Some VANs have the capability of validating passwords and user ID codes for the vendor by matching these against a valid customer file. The VAN rejects any unauthorized trading partner transactions before they reach the vendor’s system.
2. Before being converted, the translation software can validate the trading partner’s ID and password against a validation file in the firm’s database.
3. Before processing, the trading partner’s application software references the valid customer and vendor files to validate the transaction.