OCR Invoice Processing In Accounts Payable
Accounts payable (AP) processing is a vital part of business operations, ensuring that all payment obligations to suppliers and partners are met accurately and promptly.
Proper AP management helps maintain positive relationships with suppliers and partners, saves time, prevents fraud, and optimizes cash flow. However, traditional manual AP processing can be extremely time-consuming and resource-intensive, and any errors that occur in financial reporting can lead to significant consequences for the business. Manual errors, even small ones, can snowball, resulting in financial discrepancies and additional operational costs.
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How Does OCR Process Invoices in Accounts Payable?
To simplify how OCR invoice processing works in the AP workflow, here’s how it functions:
- The process begins with collecting invoice data.
- You can send the invoice to the OCR invoice processing system through email, fax, or traditional mail.
- OCR software scans these documents, whether they are in paper or digital format, and converts the text into a format that your accounting software can recognize and process. This eliminates the need for manual data entry and reduces the chances of human error. OCR ensures faster, more accurate processing, which increases overall efficiency in accounts payable.
Benefits of OCR Invoice Processing in Accounts Payable
1. Cost savings are undeniable
According to CFO.com, top-performing businesses (the top 25% of respondents) process invoices at an average cost of just $1.42 per invoice, while lower-performing businesses pay three times more, averaging $6 per invoice.
This cost trend has significantly decreased in recent years, largely due to the increased accessibility and effectiveness of automated invoicing solutions like OCR invoice processing. Today’s data clearly reflects how adopting these technologies has led to substantial cost-efficiency improvements across organizations.
2. Speeding up the process
Manual invoice processing can take between 30 to 90 days, according to Forbes. With OCR, the majority of data entry tasks can be eliminated, and the overall process can be accelerated. Research has shown that businesses that automate their AP processes can reduce invoice cycle times by up to 73%.
Time is a valuable resource. Saving time on each process accumulates into a significant amount over time. As a result, businesses can complete more tasks in a shorter period, which leads to increased productivity, revenue growth, and higher profitability.
3. Minimizing or eliminating errors
No matter how experienced or skilled an AP specialist is, mistakes in invoice processing can still occur. Even the most experienced professionals are prone to errors. Studies show that the error rate in completed commercial spreadsheets is typically between 0.1% and 0.3%. While this may seem small, these errors can accumulate and lead to significant disruptions across other business functions.
OCR invoice processing reduces these errors by automating data extraction, eliminating manual data entry, and minimizing human error. Fewer manual tasks mean lower error rates, boosting overall accuracy, saving time, and reducing the risk of costly mistakes in financial processes.
Challenges when using OCR invoice processing in Accounts Payable
OCR invoice processing in AP brings numerous benefits to businesses. However, this technology still faces several challenges as follows:
1. Accuracy concerns
Although OCR accuracy has improved significantly compared to manual processing, one of the main challenges remains its ability to recognize and interpret documents accurately. OCR can struggle with handwritten documents, poor scans, or low-quality images, which may result in errors during data extraction.
OCR invoice processing also faces difficulties when handling non-standard invoices, such as those with complex layouts, multi-language content, or non-standard data fields. This becomes even more crucial in AP, where precise information is needed to prevent financial errors and maintain the accuracy of financial reporting.
2. Integration challenges
Integrating OCR software with existing accounting systems and workflows can be challenging. Many businesses have long-established AP systems in place, so implementing new technology must ensure no disruptions to existing operations. This requires thoughtful planning and preparation to guarantee a seamless transition without causing workflow interruptions.
3. Compliance concerns
Another significant challenge when implementing OCR invoice processing in AP workflows is adhering to data privacy and security standards. Financial documents often contain sensitive information such as bank account numbers, tax information, and contract details, and security regulations such as GDPR and HIPAA require businesses to strictly protect customer data.
4. Training and maintenance
To get the most out of OCR technology, businesses need to ensure that employees are fully trained on how to use the OCR software effectively. Initial training can take time, and then, ongoing training is required to ensure employees stay up to date with new features and how to use the software optimally.
In addition, OCR software maintenance is also important to ensure the system operates effectively and is constantly updated with the latest advances in text recognition technology.
How to Truly Improve Your AP Process?
OCR is a smart choice, initially applying technologies to optimize processes for businesses. However, OCR in accounts payable still contains many barriers and challenges. One technology that cannot be ignored is expanding and overcoming the barriers of OCR, which is IDP.
Both IDP vs OCR have their own advantages in the Accounts Payable (AP) processing process. OCR is the ideal solution when you need to extract text from documents with clear and simple structures. This is an effective choice when processing invoices and documents with standard formats and the requirement is only to recognize text.
However, IDP is more prominent when you need to process large volumes of complex documents, including non-template formats or unstructured data. IDP not only provides data recognition and extraction capabilities but also semantic analysis, automatically understands and processes information from various data sources, thereby optimizing the entire AP process.
AFusion‘s IDP solution provides end-to-end outsourcing services, helping businesses customize document processing processes flexibly and effectively, suitable for the specific needs of each business while bringing outstanding efficiency in optimizing costs and time.
Learn more about AP automation solutions here: https://afusion.ai/en/iautobot-how-rpa-in-accounts-payable-superior/
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