Article

XML vs. EDI

3 February 2021

B2B invoicing is changing for the better.

Sending electronic invoices is becoming a standard for the B2B environment. And it is easy to understand why this is the case. After all, the business world is starting to recognize the apparent advantages of using electronic invoices instead of paper-based invoices.

Invoice standards are necessary to ensure the smooth transfer of data between trading partners. In essence, this translates into standardized invoice formats. In this post, we look at the two invoice formats; XML and EDI. Put differently; this is an EDI vs. XML side by side comparison. The idea is to help you better understand the two formats and, most importantly, why you should switch from EDI to XML – which is the latest electronic invoice format. Now that we’ve laid the groundwork, let’s switch gears.

What is an EDI Invoice?

For starters, EDI stands for Electronic Documents Interchange. More specifically, it is a term describing computer to computer exchange of information – usually through a private network. EDI invoices use a standard electronic format, allowing computers in the network to understand the invoice’s content. EDI offers a fast, accurate, and reliable way to do business. It also ensures shorter order-to-payment cycles. It is essential to mention that while EDI invoices are good for business, organizations truly reaping the automation benefits of this technology use EDI data integration tools and solutions.

What is an XML Invoice?

XML is short for eXtensible Markup Language. The Markup language outlines the set of rules for encoding documents in a format that’s understandable and readable by both machines and humans. XML uses the internet as a medium to communicate between two electronic devices over a network. XML invoices do not use a standard format like their EDI counterparts. Do you know what this means? It implies that businesses using XML invoices can create, customize, and manage their XML files to suit their particular needs.

XML vs. EDI – How Do They Compare?

EDI is an advanced technology that allows businesses to automate order processing and document exchange between computer applications.

XML is emerging as a superior standard that seeks to simplify how businesses conduct internet-based e-commerce transactions between electronic devices. EDI allows for incredibly secure document exchanges. XML documents require encryption to remain secure at all levels.

EDI documents are available in a compressed form that’s exclusively machine-readable. XML is human-readable and available in text format.

EDI invoices are sent through a private network. This makes it relatively expensive to send EDI invoices. XML uses the internet to send invoices. The sending costs are reasonably low compared to EDI. EDI documents generally require unique, tailor-made mapping for every new trading partner. XML requires one customized mapping for every industry grouping. In essence, this means that most businesses can use a single invoice format with XML. EDI requires dedicated servers that can cost as much as ten thousand US dollars.

XML requires a reliable electronic device with a reliable internet connection. EDI can handle high, regular transactions depending on the cost of maintaining the connection to an EDI network and the ability to keep the servers up and running. XML uses the internet. By extension, this implies that it has low, affordable flat-rate costs of keeping the internet connection and servers working. EDI-based transactions are responsible for most of the goods and services exchanged electronically. XML processes a reasonably low amount of goods and services.

EDI is usable by about three hundred thousand companies globally. It is also used by approximately twenty percent of suppliers. The primary reason for this is the high operation costs and complexity. XML has no upper limit regarding the number of businesses that can use it due to its ease of use and affordability. EDI, by design, doesn’t share resources with other programs. XML is developing in an environment of shared software dominated by an assortment of open source projects and low-cost tools.

XML vs. EDI – Which Way to Go for Businesses?

Sure, many businesses use EDI invoices. And that’s understandable. After all, the EDI technology came before XML. Still, EDI for suppliers isn’t the best option. You see, the world is now a global village connected by the internet. Therefore, switching from EDI to XML can only mean one thing – you’ll be opening your boundaries as a supplier. In other words, you’ll be able to do business with companies in other countries without worrying about late payments or having to design a new invoice every time you’re trading with a new partner. Besides, XML is quickly becoming the standard format for invoicing, so it’ll only be a matter of time before every business adopts XML invoices. As outlined in the comparison above, XML outweighs EDI in terms of flexibility, cost, and possibilities.

The Bottom Line

XML is the future of electronic invoicing. As a business that wants to streamline invoicing and cut down expenses, it only makes perfect sense to make the big switch. Overall, XML offers more customer satisfaction and improves the way you relate with your trading partners.

FAQs

  • Is EDI dead?

No, it is not. In fact, many companies still use EDI invoices. However, XML is a superior technology that has much more to offer in comparison to EDI.

  • Is XML expensive?

XML is a collection of the World Wide Web Consortium’s XML 1.0 Specification and a couple of other similar specifications – all of them free open standards.

  • Does XML/EDI replace EDIFACT?

Yes and no. Yes, in the long term, these two standards may replace EDIFACT. Still, EDIFACT is the cornerstone of XML/EDI making it EDIFACT relevant, at least in the short term.

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