OCR for AP Automation is no Longer a Game Changer

Optical Character Recognition (OCR) technology has played an important role and is continuing to do so in converting printed invoices into a digitized form that computers can process easily.

This digitized invoice information is then utilized by an AP professional for electronic workflow processing of accounts payable.

Sounds automated, right?

Well it is not pure automation and many companies spend millions of dollars on OCR tools in the hope of changing the way Accounts Payable was managed for betterment.

But what they failed to realize and are currently discovering is that using OCR tools as a strategy for e-Invoicing aren’t actually strategic?

There are quite a number of shortcomings that one needs to know before jumping in to make an investment where OCR is one of the biggest back-end components.

Let’s see what these are:

• Limited Document Layout Support

i) OCR tools perform best only with good quality typed documents. Thus, if the scan quality is poor or the invoice is soiled, creased or the text is faintly printed then OCR fails to digitize such invoices.

ii) OCR tools also fail to read handwritten invoices and also fonts that resemble handwriting create many errors during the OCR process.

• Poor Quality of Data

i) OCR solutions do not improve quality, accessibility and reliability of master data since there is a process gap between creation and digitization of invoices.

ii) These process delays not only results into delayed payments but also fails to capture early payment discounting.

• Partial Automation & Additional Human Intervention

i) OCR based accounts payable solutions manage to cover only some basic operational tasks and do not really lead to game changing results in accounts payable metrics.

ii) Often additional human intervention is required to clean up the OCR text, manually trigger the process of approval and payment.

iii) Thus, OCR although reduces the pile of paper invoices but it doesn’t automates the complete AP process.

• Process & Cost Complexity

i) OCR based AP solutions are characterized by various overheads, in-house scanning hardware and software, mail room and storage costs, staffing and paper handling costs.

ii) Taking into consideration all the additional costs for exception handling an OCR based accounts payable solution typically costs about seventy percent of the cost of a fully automated AP solution as per the on-going industry standards but provides only the benefit of making the invoice processing slightly less manual.

Key points:

1. Given all the above shortcomings it is important to understand the value provided by an OCR tool before blindly embarking on a solution that is going to be a hybridized version (AP+OCR).
2. You should understand that automating your AP workflow holistically helps you to remove the paper in your AP transactions and move you closer to touch-less AP processing.
3. This miracle is not going to happen overnight. Over a period of time, when the suppliers and the enterprise employees get comfortable working with a touch-less AP solution, this move to a paperless scenario will remove the dependency on paper and thus remove OCR for majority of the transactions.
4. This straight through processing of invoices will then ensure that all the transactions are created, submitted, matched, approved, paid and stored as “soft copies” and there is absolutely no need for any dependency on paper.
5. Visibility across the AP cycle and collaborative supplier engagement are a couple of benefits that result from leveraging the full power of E-Invoicing for your AP.
6. This means that paperless transactions have to be encouraged and performed initially with suppliers who form bulk of the invoice submissions.
7. Yes, there would still be suppliers who would send in invoices either through e-mail or through PDF and that would again need to be converted before processing.
8. Once you embark on automating your AP holistically, clear timelines with milestones have to be defined for you to make this transition from scan-and-capture based processes to a completely touch-less and paperless AP process.
9. Once you embark on automating your AP holistically, clear timelines with milestones have to be defined for you to make this transition from scan-and-capture based processes to a completely touch-less and paperless AP process.
10. If this is not defined in your plan, then your AP automation solution will never deliver the level of efficiency you aspire for.
11. Let’s accept the fact that there are software solutions that can change the way your AP functions ultimately impacting your enterprise bottom-line and sadly OCR doesn’t fit into this set of tools anymore.
12. It’s time to move beyond scan-and-capture based invoicing!