When you start looking into automating your accounts payable workflow, you’ll notice common features across AP software systems: tax form processing, electronic funds transfers, and of course, OCR invoice processing.
Short for Optical Character Recognition, OCR is technology that converts digital documents into editable files containing searchable text. Various industries that deal with heavy loads of data processing leverage this technology, from medical records to banking and, of course, accounts payable.
For the past several years, accounts payable has been going through an evolution, transforming from a cost center into a revenue-generating driver. OCR technology is essential to the conversion. Every automated accounts payable system has OCR invoice processing capabilities; the functionality enables AP software to automatically extract data from digital invoices, eliminating the need for manual data entry. Sounds great, right? However, invoice recognition software alone isn’t enough to entirely transform your accounts payable system into a dynamic workflow that can scale with a growing business.
What is Invoice OCR?
Invoice OCR is the process of extracting data from digital documents such as invoices and other accounting documents, and converting them into searchable and editable text. Invoice OCR software works by scanning read-only documents such as PDFs and images, recognizing and extracting critical information, and converting that information into editable text.
Why OCR is not enough to transform your invoice processing
Let’s be clear: OCR invoice processing is a powerful tool and has transformed the AP workflow. Without OCR, a digital invoice has limited capabilities. Accounts payable could send a digital invoice via email versus mail to an approver, but processing the digital invoice still required manual data entry.
OCR technology solved this problem. OCR extracts data from PDFs, removing the need for manual data entry. However, OCR on its own has some limitations. Retrieving data from an invoice is one thing, placing data into the correct fields in an accounts payable system is another. Consider this: invoices are required to state the amount due, payment due date, date of invoice, description of goods or services purchased, and the payee identification information, such as address, tax identification or phone number. However, the format of the invoice will differ among payees. Some vendors use invoice software to generate invoices while others make their own with a word processing program. The different invoice formats present a challenge: while OCR can extract data from a digital file, OCR doesn’t intuitively know what the data means.
Merely extracting data is not enough. You need a system that can dependably transfer data from the invoice to your AP software system with little or no oversight; otherwise, your accounts payable process remains static.
The dynamic duo: OCR invoice processing and machine learning
Here’s where machine learning comes into play. A subset of artificial intelligence, machine learning is the ability for software applications to solve ongoing problems by analyzing data without (or with minimal) manual intervention. Machine learning is being applied in nearly every field, from transportation with self-driving cars to customer service with automated chat boxes. In other words, machine learning is the driving force behind invoice capture software.
Here’s why the two technologies work together to create a robust system: OCR extracts the data while machine learning analyzes the structure of an invoice for patterns; together, they’re able to discern the data, such as knowing the difference between an address number and the amount due. The technologies enable an AP software platform to place the invoice data into the correct fields for processing within the system.
Tasks that once required manual oversight are now automated thanks to machine learning:
- Match up the correct general ledger codes to a specific vendor or transaction type
- Transfer invoice information (i.e., invoice number, supplier identification, and amount total) into the automated accounts payable system for payment processing
- Send the invoice without manual effort to the correct approver for sign off
Also, machine learning makes it easy for companies to implement an automated solution quickly. Traditionally, setting up an automated accounts payable workflow required configuring rule-based logic before launching a new platform; however, machine learning enables the AP software to learn the workflow logic on the job, meaning as it processes invoices.
Managed services for manual reviews add a “touchless” touch to your AP platform
Let’s face it: even though OCR invoice processing and machine learning pretty much eliminate the need to manually input data or manage each step of the AP workflow, the automated features don’t wholly dispel fears: what if OCR invoice software reads extracts incorrect invoice amount? Does the invoice scanning software know what to do when vendor tax information is missing?
When considering an automated accounts payable solution, look for a platform that addresses one-off situations. For example, the AP platform could offer a managed service dedicated to conducting manual reviews of invoices. When invoice scanning software triggers an alert (such as missing vendor tax identification), the AP system automatically routes the invoice to the managed service team for review. It doesn’t add to the work of your accounts payable staff. Manual intervention from your company is not required, thus creating an accounts payable workflow that’s touchless.
Features that enhance invoice recognition software: multiple languages capabilities and cloud access
OCR invoice processing, machine learning, and managed services make for a triple threat when it comes to a dynamic automated accounts payable system, but companies should also consider how the platform will fare as more payees or vendor onboard. If your invoice recognition software can process data from a variety of languages, it can give you peace of mind as you expand your business beyond domestic operations.
Along the same vein, a cloud-based software allows companies to add multiple users with ease and enables businesses to run operations from anywhere. Instead of installing an invoice capture software on-premise, businesses that opt for a cloud-based platform allow anyone with an internet connection to access the automated accounts payable system.
It’s understandable to feel that the numerous software solutions for an automated accounts payable system sound all the same. However, the difference lies in the details, particularly in how they leverage various technologies to address repetitive tasks dynamically. OCR invoice processing, machine learning, and managed services all work together to transform an AP workflow, creating “touchless” invoice processing and freeing up your accounts payable to focus on tasks that require the human touch like customer-facing issues or revenue-generating initiatives.
You may also be interested in:
Echecks: Efficient Global B2B Payment Methods
Global Payments Methods: 4 Popular Types of ePayment – Tipalti
