EDI Chargebacks: Common Causes and How to Prevent Them

For buying organizations, timely and accurate EDI data is essential to keeping their supply chains running smoothly. When incoming data from suppliers is incorrect or delayed, operations back up, shipments face delays, and revenue is lost. As a result, buying organizations often hold the supplier accountable for these operational hiccups by issuing financial penalties.

Over time, these penalties add up for a supplier creating profit losses, frustration for internal teams, and damaged customer relationships. In an industry where time often equals money, avoiding compliance fees is critical to maintaining healthy profit margins.

An EDI chargeback is a financial penalty issued by a buying organization when a supplier fails to meet their specific EDI requirements. Buying organizations issue these fees to compensate for additional labor, shipping and warehouse delays, or administrative rework caused by the supplier’s errors.

Each buying organization maintains its own set of EDI requirements and compliance rules, so chargeback fees and rules vary by organization.

Common causes for chargebacks include:

• Inaccurate Ship Notice/Manifest (856): Sending a Ship Notice/Manifest with incorrect lot numbers, missing item quantities, failing to meet the customer's minimum notice time before delivery, or sometimes even after the delivery.
• Non-Compliant Barcode Labels (GS1-128): Printing barcode labels in the wrong format, using incorrect placements on pallets, or missing required data.
• Late or Missing Invoices (810/880): Transmitting billing data late or with discrepancies between the purchase order prices and final billed amounts.
• Transmitting Bad EDI Data: Exchanging data that contains formatting errors, missing required fields, inaccurate details, incorrect pricing, or mismatched purchase order numbers.
• Missing Purchase Order Acknowledgment (855): Failing to send an acknowledgment leaves the buying organization out of the loop on if the supplier received the purchase order and if they want to accept, reject, or make changes.

Aside from direct financial losses, chargebacks drain valuable operational time. Teams must investigate the cause, re-key data, and implement safeguards to prevent reoccurrences. Eliminating these errors protects your revenue while boosting supply chain performance.

How to Prevent Chargebacks

Preventing chargebacks starts with understanding your customers’ EDI requirements and setting up your operations to comply from day one.

• Understand the exact document types, data formats, delivery windows, and testing and certification protocols required by each trading partner.
• Ensure autofill features and templates are correctly set up so you can rely on document turnaround to automatically populate data, reducing the need for manual entry.
• Work with an EDI provider that stays up to date with the latest industry requirements, so your system remains fully compliant as guidelines change.

 Ensure Seamless Compliance with Edict Systems

Navigating customer requirements doesn’t have to fall completely on your internal team. Experienced EDI providers bring deep industry knowledge and have long-standing trust with many major buying organizations, allowing you to trust their solution to help you resolve compliance issues quickly and work to prevent reoccurrences. Edict Systems offers solutions to get you compliant with your customer’s EDI requirements based on your business needs.

Web-based EDI solutions like Edict Systems’ WebEDI, offer an easy way to stay compliant with customers. WebEDI is a browser-based solution that lets you send and receive documents and generate compliant shipping labels with many fields already auto populated with information from the original purchase order. This eliminates manual data entry and reduces the risk of costly errors and chargebacks.

If you are looking for a solution that integrates directly into your existing ERP, MRP, accounting, or business system to automate a high volume of incoming orders, Edict Systems can help. Our integrated EDI solution connects with any existing business system including SAP, JD Edwards, Microsoft Dynamics, and more. Data is mapped to and from your system specifications without manual intervention. Your team never has to rekey information, orders process faster, and your business stays compliant even as your business needs grow.

At Edict Systems, we do EDI so you don't have to®.

Edict Systems connects thousands of suppliers to their customers, streamlines their order and billing processes, and removes complexity from daily EDI operations. With solutions designed to help suppliers of all sizes, we help eliminate the need for manual data entry, focus resources on core business needs, and reduce the possibility of incurring chargebacks. When you’re ready to get started, contact our EDI experts.