What is Invoice OCR?
Invoice Optical Character Recognition (OCR) is a technology that enables the automatic extraction of data from scanned or electronic invoices. OCR software uses algorithms to recognize and interpret characters, such as numbers and letters, from an image or PDF file and converts them into machine-readable data that can be stored and processed in a computer system.
OCR is a gift to AP clerks everywhere, but it’s not a silver bullet.
If you’re an AP team looking to make life easier, an optical character recognition (OCR) solution by itself is not a very strategic investment.
It is indisputable that automatically lifting data off of invoices is better than manually reading through and typing in the data yourself. But how much better?
If you are an AP clerk in charge of processing vendor invoices, the answer is: Not much.
In spite of the clear advantages that OCR technology provides, the requirements for precision in accounts payable invoice processing renders most of its benefits ineffective. Here are three reasons why:
Plenty of manual work is still necessary
90% – This is a commonly advertised rate of accuracy among OCR solution providers. While this is a flashy number, it really conveys that one out of every 10 characters will not be accurately lifted. When you’re processing hundreds of invoices every month, this adds up to a very large amount of inaccuracy.
If you want to be buttoned up and ready for your next audit, you’ll need to go back and fix all of those errors. Unfortunately, there is no simple way to do this. You won’t know where the errors are, and you’ll need to read through the whole invoice to double check every field for accuracy.
At the end of the day, 90% accuracy results in a marginal amount of saved time, and (still) plenty of manual processing.
Varying invoices prevent OCR tech from thriving
One of the greatest strengths of OCR technology is its ability to “learn” and develop a more nuanced approach to reading specific types of invoices. It’s possible that once an OCR solution learns how to read an invoice, the accuracy of its reading can increase over time.
Unfortunately for AP departments, the types of invoices businesses receive is constantly changing. Between invoices coming in for one-off projects and vendor turnover, there is very limited opportunity for organizations to truly see the benefits of machine learning in OCR.
Holistic solutions > Point solutions
Accounts payable is one of the most manual and painful processes in accounting today. If you’re going to invest in a solution, it makes sense to pick one that takes a holistic approach to solving pain points across the entire accounts payable process, instead of just invoice capture.
AP Automation solutions combine OCR technology with a human review to guarantee 99.5% accuracy for every invoice, and then proceed to eliminate the pain and friction that has traditionally come with getting invoices approved and payments authorized.
Are you curious to see what your company would look like with AP Automation? Contact MineralTree for a free assessment.