Revolutionize Invoicing Process with Optical Character Recognition: Harnessing the Power of AI

OCR (Optical Character Recognition) was first developed by Ray Kurzweil's company in 1974 to assist the visually challenged by converting scanned information to digital audio. Although OCR had accuracy issues initially, it gained popularity in the 1990s for digitizing newspapers. OCR software today offers near-perfect accuracy for data extraction. OCR is now widely used in businesses, including accounts payable, for extracting data from invoices into accounting software without manual entry.

What exactly is OCR?

OCR, or optical character recognition, is a technology that reads data from printed or handwritten documents and translates it into a usable format that can be edited. It uses a scanning device to extract necessary data from documents, making it useful for automating common business processes like invoice processing.

What are the Common Uses of OCR?

OCR technology offers various benefits for businesses looking to automate their accounts payable department, including reducing data entry by scanning invoices and receipts, archiving historical data, depositing checks electronically, mail sorting, and translating text.

What is OCR in Accounts Payable?

As we discussed earlier, OCR technology is used in many diverse fields, and it is also often used to automate invoice processing as well. It has the potential to read and extract vital information from invoices. This information includes invoice number, product code, price and due date. This virtually eliminates the need to enter information manually and helps us save time and reduce errors.

However, sometimes the OCR technology may not be able to read the data correctly. Also,  it might save the extracted data in the wrong format. So, the solution for this is combining OCR with machine learning. Using this combo, companies are enhancing their overall accuracy and are making invoice processing highly efficient.

What Is Invoice OCR?

Invoice OCR is actually a cool technology that has the capability to extract data from the invoices. So what it does is basically It identifies characters that need to be recognized and uses two algorithms: Pattern Recognition and Feature Extraction. 

Pattern Recognition

Pattern recognition is actually a technique used in OCR. It involves using a database of different fonts and typefaces to identify recognizable characters on a certain invoice. OCR (optical character recognition) can identify the data or pieces of information given on both typed and handwritten documents as well.

Further, pattern recognition is capable of diagnosing various elements in a document, such as images and tables. In addition, the OCR software compares the image of each character on the bill with the database, and it selects the best match. This process allows OCR software to recognize and extract data from the given invoices with high accuracy.

Feature Extraction

Feature extraction is another algorithm used by OCR to extract data from invoices. It drills down on essential pattern recognition to further identify specific characters. This algorithm identifies features specific to the letter, such as the ability to recognize the difference between an "F" and an "E" for more accurate data capture. OCR software uses feature extraction to identify specific features of each character on the invoice, which allows it to recognize and extract data more accurately.

How Does Invoice OCR Work?

Automated Invoice OCR extracts critical information from invoices provided by suppliers and vendors without manual intervention.OCR can be utilized either by scanning invoices manually or through an invoice automation solution. Regardless of how they are received, invoices typically go through these general steps when processed by OCR. Here is a step-by-step explanation of how Invoice OCR works:

Step 1: Invoice Received

Receiving the invoice from the vendor or supplier is the first step. A variety of methods can be used to accomplish this, including email, fax, and regular mail.

Step 2: Scan the Invoice

The next step is scanning the invoice into the OCR system. This can be done manually or with the help of an automated AP system.

Step 3: OCR Reads the Invoice

After the invoice is scanned, the OCR technology interprets the invoice and extracts important details such as the invoice amount, vendor and supplier name, and payment due date into a format that can be easily read.

Step 4: Check Each Element Using Pattern Recognition

The OCR technology thoroughly scans every image, character, or word, examining them one by one and utilizing pattern recognition to recognize each character. It then cross-references the recognized characters with a database of fonts, characters, and letters.

When it is done with pattern recognition, it moves to feature extraction, which finds the best and perfect match for the previously scanned characters.

Step 5: Users Review the Extracted Data

Users review the extracted data to ensure that it is accurate. If any mistakes are found, they can be corrected at this stage.

Step 6: Export Extracted Data

Finally, the extracted data is exported into your ERP system or accounting software application, saving significant time on manual data entry.

A Few Advantages of OCR

We can do a lot of things with the power of OCR technology, including:

● Save more time and resources

● Improve accuracy by diminishing human error

● It helps increase productivity and to free up employees' time and energy to complete more valuable work. 

● Digitising paper documents will greatly simplify and speed up document recovery and storage.

● Also, OCR has the ability to perform faster information processing and distribution, which aids in faster communication and decision-making. 

● It also indirectly contributes to using less paper.

● Moreover, OCR ensures secure transmission and storage of sensitive information, increasing security.

Bottomline

In conclusion, OCR technology is revolutionizing the invoicing process by harnessing the power of AI. By using OCR software, businesses can extract data from invoices, reduce errors, increase accuracy, and streamline their accounts payable processes. OCR technology offers a variety of benefits such as archiving historic data, depositing checks electronically, mail sorting, and translating text. Combining OCR with machine learning can enhance accuracy and make invoice processing even more efficient. For best results, businesses should consider partnering with an AI services provider specialising in OCR technology to optimize their invoicing process and achieve greater efficiency and cost savings.

Author bio: Vishnu Narayan is a content writer, working at ThinkPalm Technologies, a software & mobile app development services company focusing on technologies like BigData, IoT, and AI services. He is a passionate writer, a tech enthusiast, and an avid reader who tries to tour the globe with a heart that longs to see more sunsets than Netflix!