OCR for Accounts Payable: The Ultimate Guide for Efficient Invoice Processing

Optical Character Recognition (OCR) technology is a powerful tool that allows devices to scan PDFs, images, or other text-based documents and extract usable text data. This extracted data can then be processed and transformed into valuable information. In the realm of accounts payable, OCR has played a pivotal role for quite some time. It facilitates the direct capture of vital invoices, purchase orders, and other accounts payable-related data, effortlessly converting them into an editable format. This not only saves time but also reduces the risk of manual data entry errors, resulting in a more streamlined and productive accounts payable function.

OCR technology - How it works

OCR technology has seen widespread adoption in accounts payable functions, bringing about a revolutionary change in how businesses manage invoices, purchase orders (PO), and other payables-related documents. By harnessing the power of OCR, companies can efficiently extract crucial information from these documents, including invoice dates, invoice numbers, PO numbers, amounts, due dates, and more. This streamlined data extraction process significantly enhances processing and payment workflows. Now, let's delve into the specific steps of how the OCR capture process works for invoices:

• Scanning or uploading invoices - To initiate the OCR process, invoices can be uploaded as PDFs or image files or scanned using smartphones or other devices. Once uploaded or scanned, the OCR tool proceeds to process the document for field extraction.
• Data extraction - The OCR technology then utilizes advanced algorithms to extract relevant text fields from the document. By accurately recognizing and capturing the necessary data, OCR ensures a seamless transition to the next step.
• Matching text to relevant fields - OCR models trained for invoice data extraction present you with data precisely aligned with the required fields on the invoice. These OCR systems are typically well-versed in various invoice formats, enabling them to efficiently match data for any new format they encounter.
• Sync data to accounting software - Extracting invoice data is only the beginning; the real value lies in processing the data effectively. The extracted invoice information is seamlessly integrated into your accounting system,making it readily available for payment processing.
• Approvals and payment processing - After successfully syncing the data with the accounting software, the invoice is then sent for review and approval by relevant business heads. Once the necessary approvals are obtained, payment processing is initiated, ensuring timely and accurate payments to vendors.

Benefits of OCR technology

OCR has undoubtedly revolutionized accounts payable processes. Gone are the days when accountants were burdened with the tedious task of manually entering and verifying invoice data. Today, more than 60% of companies have embraced OCR tools to varying degrees within their accounts payable process. The implementation of this cutting-edge technology offers a multitude of benefits, elevating the efficiency and accuracy of accounts payable processes to new heights.

Reduce errors

Manual processes are inherently prone to errors. When accountants spend hours manually entering invoice data into accounting systems, especially under tight deadlines, errors are bound to sneak in. OCR technology serves as a powerful solution to significantly reduce errors in the payables process. If your company processes a large number of invoices daily, this issue may impact you even more.

Boost your accountant’s efficiency

OCR technology is incredibly efficient, usually taking no more than a few minutes to process invoices for data extraction. This impressive speed significantly reduces the burden on your accountants, who might otherwise spend valuable time manually entering lengthy PO numbers, invoice numbers and other invoice data into your system. By implementing OCR, your invoice processing time is substantially reduced, allowing for a faster and more streamlined accounts payable process.

Improve productivity

If your accountants spend most of their time entering invoices into your accounting system, they might miss out on other important tasks or become overworked, leading to a loss in productivity. With OCR technology, you can effectively remove the burden of manual data entry from your accountants' workload, allowing them to concentrate on more critical tasks at hand. With OCR handling the time-consuming and error-prone data entry, your team can redirect their efforts towards activities that demand their expertise. 

Digitize invoice storage

Storing and managing paper invoices can be overwhelming and time-consuming. However, with the incredible capabilities of OCR technology, this burden is greatly eased. OCR enables you to centralize all your paper and digital documents onto a single platform, streamlining your entire invoice management process. By harnessing OCR, you can swiftly extract crucial data from invoices and seamlessly sync it with your accounting system in real time, eliminating any delays or lags in the process. 

OCR and AP Automation

While OCR technology significantly reduces the burden of manual invoice processing, it is essential to know that it may not address all efficiency and accuracy issues. Invoices getting stuck in approvals, delayed check deliveries, and inadequate vendor communication can still pose financial risks that OCR alone can’t eliminate. To achieve a truly streamlined and error-free AP process, you should consider adopting end-to-end AP automation solutions. These comprehensive platforms automate the entire AP workflow, starting from invoice digitization and cost center and GL account allocation to invoice approvals, follow-up reminders, and vendor payments – all consolidated on a single platform.

A robust AP automation software, such as ClearTech, not only ensures smooth workflow management but also synchronizes all relevant data back to your accounting system, ensuring accurate and up-to-date financial records. Additionally, it provides valuable insights into invoice anomalies, line item spikes, and uncontracted spend, empowering businesses to make informed decisions and optimize costs effectively. With accounts payable dashboards offering full visibility of AP aging and a savings dashboard to analyze and improve spending, ClearTech, and similar automation solutions enable businesses to achieve greater financial control and efficiency.