The Benefits of Invoice Processing with OCR

Want to make your Accounts Payable processes less miserable?

Start with automation 

It's common sense at this point. Dealing with invoices manually doesn't just take time, a precious resource no one has in abundance, it's also a secure pathway to falling victim to fraudulent activities.

Even more so when your business is growing and the quantity of invoices to manage is just plain…overwhelming.

So yes, automating AP makes sense. 

One of the features you'll find quite common in procurement and spend management software is called OCR. 

Optical Character Recognition 

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And no, we promise you it isn't as complicated to understand as it sounds.

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What's Invoice OCR?

Raise your hand if you love to fill out forms

No?

Well, yes, that's something most of us don't enjoy.

OCR is the technology you'll want to use to read information from images or documents and store useful data digitally. 

For invoices, it means you don't have to go over the document and pray you don't forget about an important detail.  You only have to take a PDF or scanned copy, and the OCR will automatically pull out key bits of information like invoice numbers, dates, amounts, vendor names, and line items, without you having to type them in manually.

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How OCR Works in Invoice Management

Upload or scan the invoice 

First step?

Give the system something to work with.

This could be a scanned document ready to be read, a PDF, or a photo from your phone. As long as there's information to be extracted, it's going to work. 

Image preprocessing 

Before going into the details of the written parts of the document or image, the system makes sure that the format and appearance of it are the correct ones. Maybe the angle needs to be fixed, the contrast changed, or there are some smudges that must be deleted. 

The cleaner the layout, the better the final outcome.

Extracting the text 

This is where the fun begins 

Now that the image is clean, the OCR can identify the characters, numbers, and words, so it's easier to spot important things like invoice number, amount to be paid, dates, and much more.

Data validation 

One of the biggest problems people have regarding invoices is that sometimes it's complicated to detect anomalies. Your team is just too busy to spend even more time double-checking everything. 

And that's how problems start.

OCR systems are prepared to immediately check for errors, detecting missing fields, duplicate invoices, or non-sensical values so you can act accordingly. 

Sending the data 

If everything is ok, the data collected is sent into your accounting or ERP system. Making it simpler to route the invoice for approval, match it with a PO, or schedule it for payment.

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Benefits of OCR for Invoice Management 

Data accuracy 

It might seem like a simple thing, after all, what's the big relevance?

It saves you both time and money, that's why 

Processing an invoice with incomplete or erroneous information means not only a mistake, but also a risk of losing your suppliers' trust. If that happens more than once, well…you can bet nothing good will come out of it.

OCR is designed to prevent those scenarios, flagging mistakes in the invoice, before proceeding to send them to your systems. 

Faster processing time 

It's the magic of automation. 

It makes things happen faster, and that's something very attractive for anyone who manages AP processes.

You don't have to wait until someone enters each invoice manually. OCR gets it done in seconds. Depending on the software you are working with, you won't need to worry about matching the invoice to the right purchase order. 

The system can handle it perfectly.

Saves money 

You know the saying 

Time is money 

And since we know that OCR is a wonderful tool to save crazy amounts of time, it's kind of normal to see that it can be another great choice if you want to reduce operational costs. 

Think about it, instead of wasting hours of productivity, you now have time to work on projects that matter. 

And if we talk about the whole payment cycle? Well, be ready to start qualifying for early payment discounts.

Better compliance 

Since OCR can automatically log and organize invoice data, it makes tracking and reporting a lot easier. Need to pull up a record during an audit or show a history of payments? You’ll have everything neatly stored.

When OCR Might Not Work?

A bit of a spoiler?

All the following cases can be quickly solved 

Poor quality scans or images 

Yes, OCR is a fantastic solution, but it can't do much if you provide blurred information or low-resolution pictures.  

Set standards for how invoices must be submitted to the system.

Handwritten notes 

Everything has a limit, and handwriting is the barrier OCR still struggles to overcome.

If your suppliers send you invoices with notes written on the corner, you'd better have a friendly chat with them to explain why that isn't a good practice.

Unusual layouts 

Invoices come in all shapes and styles. Some have logos everywhere, others split data into odd sections, and some even mix languages. If your OCR tool hasn’t been trained on a wide range of formats, it may misread key fields or miss them entirely.

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How to Choose an OCR Solution for Invoices

Okay, but with so many platforms out there ready to automate AP operations. How can you know which one is the best for your business?

Make sure it supports your invoice management processes 

Obvious, but still worth mentioning.

Not all OCR tools are built for invoices.

Make sure the one you choose can recognize all the relevant details and is ready to do the matching process afterwards. Bonus points if it supports multiple languages, currencies, and formats.

Check for AI capabilities. 

Ideally, the solution you go for will use machine learning algorithms to constantly improve based on your data.  Pretty useful if your company receives different invoice formats.

Integration 

It's another must-have

If the platform that brings you the OCR features can't get along with the rest of your systems, then you aren't really moving forward, are you?

The more seamless the connection, the less manual work you’ll have to do.

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Make sure it's ready to scale

All companies have a common goal

Expand at some point

Even if you're only starting your business journey, your operations will reach a moment when growing is seen as the next logical step. 

The tool you choose?

Has to be ready for it

It's also smart to check if they offer onboarding help, live chat, or dedicated support for troubleshooting and updates.

Cost is also important. 

As we learned in our Top Procurement Software comparisons series, when it comes to finding digital procurement solutions, there's no shortage of options. 

One will be more suitable for larger organizations, and others will target the needs and budget of a growing business. 

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The final decision is going to be a mix of what your budget is and your requirements for the short and long term. 

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