Video: Electronic Data Interchange

In this lesson, navigate the digital realm of financial transactions with Nick Palazzolo, CPA, as he unpacks the concepts of Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). Discover how EDI facilitates the computer-to-computer exchange of business documents, leading to greater efficiency and reduced risk of stockouts. Nick illustrates how EDI improves business communication, moving far beyond traditional paper methods. He also demystifies EFT, likening it to popular apps like Venmo or Zelle, and explains how it simplifies the process of transferring funds between bank accounts, enhancing accuracy by reducing human error associated with manual data entry. Join Nick as he elucidates these technologies with his signature blend of expertise and accessibility.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Just two facets to know what are EDI, which is electronic data interchange, and EFT, which is electronic funds transfer. It's a whole big grab bag, right? It is just one big old grab bag of terms and topics to know. Well, Electronic Data Interchange, this term just means it's the computer to computer exchange of business documents. So it's when computers are communicating with each other.

So in standard electronic format between business partners, this allows for increased speed and communication as compared to using paper. And with better communication, there is a reduced likelihood of stock out costs. Now, this might seem oddly specific and all these terms and examples and the way I wrote it, this is how they want you to know for the exam. I mean, obviously this is going to result in everything being better because you can instantly communicate rather than using paper. And you can tell someone down the hall, hey, get over here.

You ping them on your system and say, get over here, we got to fix this audit quick because we have a meeting at three and you can't really do that with paper. So overall, yeah, it's really just how computers communicate and it's going to really improve everything all around the business. Now, EFT, this is just think of this like Venmo. Think of this like Zelle, cash app, whatever you use, it's just the electronic transfer of money from one bank account to another, either with a single financial institution or across multiple institutions using computer based systems and without the direct intervention of bank staff. Now, what goes on behind the scenes if you send maybe they need a specific person to sign off on it.

If you send more than, I don't know, $10,000 or something, I

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Information Systems

Module: 3 Concepts, 33 Videos

Understanding IT Overview and Objectives

3:00

IT Governance

11:52

Electronic Data Interchange

2:16

Business Information Systems