Invoice Scanning and Intelligent Data Capture: Everything You Need to Know
According to the Economist, data is the most powerful resource in the world. If a business wants to be successful, it needs to be able to capture, analyze and use data correctly.
Financial information gained from supplier invoices offers valuable insights along with business-critical data. Carefully handling and structuring this information can open new business opportunities and bring more profit to the company.
However, getting accurate and timely data insights from various invoice documents is an expensive, time-consuming and laborious process. Some businesses are hiring data entry staff to manually key-in invoice data into financial or bookkeeping software. Others are outsourcing this job overseas.
In both scenarios, manual invoice processing is an error-prone and expensive process. Human errors are inevitable because people make mistakes. They also get sick or leave. It takes time to train new staff and correct errors. Outsourcing may also pose data security issues. Relying on manual data entry to facilitate your financial health is a risky adventure. The lengthy process, along with incorrect or lost data, can cost thousands if not millions to a business.
As a result, many businesses are looking for ways to reduce errors and the time required to capture and process invoice data.
In this article, we will discuss how an invoice scanning and invoice data capture can help. We will also discuss its limitations and more superior alternatives available today.
What is invoice scanning software and how it works?
Invoice scanning software (also known as Invoice Data Capture Software or Invoice OCR Software) is a computer program that can extract invoice information into editable format, e.g. Excel.
Automated data entry is a core purpose of any invoice scanning solution. It eliminates the need for manual data entry, speeding up the delivery of business-critical data and financial insights.
Originally, invoice scanning software implied scanning of paper-based documents in order to digitize and capture invoice data. These days, only a fraction of invoices arrive in a paper format, most of the invoices arrive in PDF or another digital format. So, there is no need in invoice scanning. It is becoming an obsolete step in the accounts payable process.
It still bears the name of invoice scanning software as it comes with invoice data capture all rolled into one.
Optical Character Recognition (OCR) is an underlying technology that plays a key role in the invoice data capture software. The basic OCR can extract characters, such as letters, numbers and symbols from digital documents. To see how it works, you can use this free online OCR tool. It will produce unstructured, raw data that might take some time to arrange before you can use it. Still, it might be easier to copy-paste and structure this data rather than manually key-in from scratch.
Intelligent invoice capture
Thanks to the progress in artificial intelligence (AI) and machine learning in recent years, modern invoice scanning software can produce a far better outcome.
Invoice OCR software injected with AI and neural network technologies can offer a more accurate data capture result. A data capture engine in Ocerra AP is an intelligent and smart machine that can not only capture raw data but also give this data a meaning. Our OCR knows where the invoice header information, where the table, the lines, the description and the footer. Moreover, it can classify this data to fill up the correct fields, e.g. GL codes, amounts etc. This all happens in seconds.
At Ocerra, we are going an extra mile; we are not just an invoice scanning software offering automated data entry; we offer accounts payable automation software. This leads us to reveal some of the limitations of the invoice scanning and data capture systems.
Limitation of invoice scanning and data capture
A. Invoice scanning and OCR software is very limited in terms of automation.
It might identify the key fields in the invoice, but you will need to transfer it to your accounting or ERP system manually. For example, you will need to upload your PDF invoice first, go to your system and create a new bill/invoice and transfer data to your system. Basically, you will need to copy-paste back and forth. After finishing, you will process an invoice as usual.
An AP automation software is an integrated solution that aims to automate the entire accounts payable process. It automatically captures PDF invoices from the email inbox, auto-extract data and export invoices to your system. You can add an automated invoice approval process so invoices can be routed to the right person for the approval. You can learn more about AP invoice automation features here.
Here’s an example of how AP automation works:
If you are receiving paper invoices, it is not a problem for AP automation. You can scan, save as PDF and email to your AP inbox as shown in the video.
B. Human validation for data accuracy is still required
No matter what you are using, invoice scanning or AP software, data capture engines are still not perfect. There is no such OCR software that can extract data 100% correctly first time from a new invoice format. The problem is various invoice layouts and styles. Therefore, a system needs to get familiar with the invoice layout first. For this reason, invoice ocr should be very smart. In Ocerra you can train invoice only once and the system will read the data correctly next time you receive an invoice from the same supplier.
We call this process “annotation”, the way to train AP software to read invoices faster.
Some invoice scanning solutions can offer training option too. However, you need to make sure the solution is in the cloud. This way, the system can exchange training history among other users. For example, if someone has already trained an invoice from PlaceMakers, and you receive an invoice from them as well, you won’t need to do any training at all. The more you use it, the smarter it becomes.
Standalone invoice OCR software may also struggle to extract more granular data such as invoice description. Build-in data engines are more reliable and user-friendly.
Why are some companies still using invoice scanning instead of AP software?
Invoice scanning might be a good option if you only need basic data from the invoice,
Another reason, if you are using a custom-made software for your accounting and bookkeeping purposes that no one wants to integrate or it costs you a fortune. The whole idea of AP automation might seem less attractive in this situation.
You don’t want to get rid of your AP staff, relationships and harmony in the company are more important for you than saving time and money.
There are some accounts payable myths that you should try to avoid if you are not falling into any situation above but still have some doubts about it.
In all other cases, you can freely explore automated invoice processing. It is more available than ever before.