Optical character recognition, or OCR, is a key data capture capability of modern AP teams. OCR technology analyzes a page layout, like an invoice, and automatically identifies its key components like vendor, date, amount, invoice number, line items, and so on. It replaces what's historically been a slow, manual process that's prone to human error with a fast, accurate, and cost effective technology.
The Benefits of OCR
The benefits of OCR are straightforward and already stated: fast, accurate, and cost effective data capture from your invoices. You should, however, be mindful of a couple of things when evaluating the benefits of OCR. First and foremost, is invoice volume.
If you are processing more than 1,000 invoices per month you are typically a good fit for OCR. For mid to large-sized companies, OCR is typically the front end process to a larger AP automation project. It makes sense in these cases to invest in a platform with a variety of features for coding, approval, and routing. These are solutions like OnBase, Compass, or even Filebound.
Another important consideration to understanding the benefits of OCR is the complexity of your AP workflow. For simple workflows, OCR will provide significant performance improves while complicated workflows will see an incremental improvement from OCR by itself.
Reducing AP Cost with OCR
In today’s competitive environment, cost savings are vital particularly where they relate to core business functions such as accounts payable. Advanced AP Automation solutions use AI and machine learning to receive invoices, interpret them and process them for payment. We think about these tools like a digital workforce. The robotic “employee” works 24 hours a day, seven days a week and 52 weeks per year. Your new team member can incorporate the use of OCR software that can accurately capture invoice data in a fraction of the time of a human employee.
This results in cost savings by:
- Automating a data entry task
- Eliminating data entry errors
- Faster turnaround for early payment discounts and reducing workflow bottlenecks
- Electronic document management saves on storage and retrieval
The Limits of OCR
While there are many benefits to invoice OCR, it's not a panacea. There are limits. The often quoted "bad data in, bad data out" applies. Here are the most common challenges that OCR faces.
- Image quality
- Source information
- Vendor data for validation
Depending upon your business objectives, OCR is an important step in your AP automation journey or a part of a larger digital transformation project that can automate all or a larger part of your workflows.
The Costs of OCR
Of course, there is another consideration, and that's the cost to get started. Here are the components of standing up OCR for your organization.
- Training the software to recognize your vendors and invoice formats
- Configuring data to export to your accounting solution
- Training your users
- Verifying the recognition results
- Maintaining the system going forward
Earlier we noted that these costs are variable depending upon the number of invoices you process and the complexity of your workflows. There are other factors like the number of users and the data that you are capturing in the first place that also impact your costs. To get an accurate estimate of your costs, we need to have a brief conversation to understand the current state of your invoice processing. Please schedule a call at your convenience using the button below.