Introduction
Over the last few decades, the world has seen an advancement or shift in technology. Where there was a time when everything was done by humans, now there has come a time when almost every task can be completed by artificial intelligence or automation irrespective of the industry.
This has also led to an increase in the world economy as business efficiencies have improved, and organizations are able to focus more on their strategic business activities than on completing their manual tasks.
Now, we all know that be it any business – small, medium or large, its basic operations include invoice processing. With the increase in business operations around the world due to improved speed, accuracy and efficiency, the volumes of invoices for each business have also increased.
As the volume increased, the task of invoice processing became more time-consuming, prone to errors, and labour-intensive. As a result, as in any other job in every industry, AI invoice processing also made an introduction in the form of automated invoice processing.
One of the most important technologies used in automated invoice processing is OCR, or optical character recognition and it is this technology and its various benefits that we will try and understand today with the help of this blog.
Automated Invoice Processing
Before discovering the various benefits of OCR in automated invoice processing, it is important to understand what automated invoice processing is, why it is important, and how it actually works.
What is Automated Invoice Processing?
Automated invoice processing can be defined as the process that uses digital technologies, such as invoice scanning software and OCR, in order to manage the receipt, entry, and approval of invoices.
With the help of automated invoice processing, organizations are able to reduce manual data entry with OCR, leading to the streamlining of organizational workflows from invoice receipt to payment.Â
OCR invoice processing has the ability to automatically extract valuable information from invoices and integrate it into the accounting or ERP systems of the organization.
Why is Automated Invoice Processing Important?
Traditionally, the task of invoice processing was done by the human resources of an organization. As a result, the task was extremely monotonous for the employees in addition to being time-consuming and prone to errors.Â
As the volume of invoices increased, either the organizations had to hire more employees or increase the risk of delayed payments, which further affected the efficiency of the business in a negative manner.Â
When automated invoice processing came into the picture, more and more organizations implemented the technology as it helped to improve the efficiency of the business, reduce errors, and handle large volumes of invoices in a few minutes, which generally took days to be completed, leading to timely payments. In addition to this, the employees (especially the finance team) who were responsible for manual data entry gained free time on their hands, which they were able to use to focus on strategic developments, leading to an overall improvement in the operations of the business.
How Does Automated Invoice Processing Work?
The key steps that are followed during the entire process of automated invoice processing include the following:
- Invoice Receipt – The first step of the process requires capturing the invoices through various channels, such as scanned documents, emails, images, PDFs, etc.
- Data Extraction – The next step is the most important step as it involves the extraction of the key data from the invoice, such as vendor details, invoice date and number, amounts, etc., with the help of advanced artificial intelligence technologies, such as OCR (optical character recognition).
- Data Validation – Once extracted, the data needs to be validated. Traditionally, this step was carried out with the help of human intervention, but in invoice automation with OCR, the data that is extracted is validated against purchase orders, or contracts in order to ensure accuracy and precision and fewer errors.
- Approval Workflow – As the extracted data is validated, it needs to be approved, which is done by moving the invoice through the entire route of the approval process that is based on predefined rules.
- Payment Processing – The last or final step of automated invoice processing is that the invoice is approved and then scheduled for payment.
Benefits of OCR in Automated Invoice Processing
Given below are some of the benefits of OCR in automated invoice processing:
Eliminating Manual Data Entry
With automated invoice processing, organizations are able to eliminate manual data entry, and with AI invoice processing, the need for human intervention is completely eliminated.
Earlier, when organizations operated through manual data entry, which made the entire process time-consuming and prone to errors in the form of misplaced or incorrectly entered data. As a result, there was a high likelihood of the payments being delayed due to delayed processing.Â
By using OCR for financial document management, organizations are able to eliminate the need for manual data entry as optical character recognition in finance extracts key information from all the invoices to accelerate the process of invoice processing without any kinds of errors.
Faster Processing Times
By implementing automated invoice processing, organizations are able to speed up the processing time required from invoice receipt to invoice approval. As a result, they are also able to achieve quicker payment cycles, which leads to better management of cash flows in an organization.
This is done as OCR automatically converts physical or digital invoices into actionable data, which helps te system to immediately process and route the acquired information for approval.
As the need for manual data entry is eliminated, the turnaround time also improves, leading to faster processing times with respect to OCR invoice processing.
Improved Data Accuracy
As mentioned earlier, traditionally, manual data entry was not free from errors and even a single misplacement, addition, or subtraction of a number or even a decimal could lead to significant financial discrepancies.
For example, if an organization shows a monthly average profit of around $50,000 and in one of the months, an invoice which is of the value of $5,000 is misrepresented as $500,000, there would be a significant discrepancy in the financial statements of the organization which could even lead to scrutiny by the income tax office or could lead to spending a huge amount of time in finding the invoice through which the mistake is done and correcting the said mistake.
In case of automated invoice processing, such extreme mistake or error cannot happen as the OCR technology captures the data directly from the invoice with a very high accuracy and precision rate. In addition to this, once extracted, the data is also validated against purchase orders or contracts to ensure that there is no error.
Conclusion
By integrating OCR into invoice processing, organizations have moved toward the realm of automated invoice processing, which has brought many advantages to the organizations. By improving efficiency and the speed of invoice processing, which ultimately leads to timely payments and better cash flow management, automated invoice processing provides a competitive advantage to the organization implementing and integrating it into its existing systems.
At CrossML, we provide our customers with OCR solutions that convert their invoice processing into automated invoice processing that helps them to improve the overall productivity and operations of their business, leading to better growth and success opportunities.
FAQs
OCR improves and streamlines receipt management by automatically extracting information from invoices, reducing manual data entry errors, and digitally organizing all the invoices. As a result, there is improved efficiency, faster processing, easy retrieval of documents, and better accuracy in the invoice processing task. In addition to this, it also helps to improve the tracking of expenses and financial records of the organization.Â
Businesses should adopt OCR for invoices as it helps to automate data extraction, improve accuracy by reducing human errors present in manual data entry, and speed up the cycle of invoice approval. In addition to this, OCR in invoice processing improves compliance, minimizes labour costs, and easily integrates with existing financial systems. This helps to make the entire process of automated invoice processing more efficient and cost-effective.
The challenges that OCR solves in receipt processing include human errors associated with manual data entry and organization of business receipts. In addition to solving these challenges, OCR also improves compliance with tax regulations, enhances accuracy, and makes expense tracking easier with the help of digitizing and automating receipt handling workflows.
OCR technology can benefit invoice workflows by automating data extraction, reducing errors, and speeding up the process of invoice approval. It also leads to faster payments, improved vendor relationships, and streamlined auditing, as there is easier access to digital records. As a result, the invoice management of the organization becomes more efficient and scalable for growing businesses.
