OCR AND AP OPTIMIZATION

Process Consultants all over the world are emphasising on the importance of transforming the AP
department into a strategic business unit via superior technology enablement for Vendor Invoice
Management. While many business processes have become automated, accounts payable (AP)
processes remain largely paper-based and cumbersome. A recent study conducted by Gartner and
Aberdeen Group reveals that 75% to 80% of invoices received today are still paper-based and needs
to be processed manually. Clearly, paper is here to stay- at least for a while! The question then that
needs to be addressed is-what is the best way to streamline these manual process to increase
efficiency and enable resource optimizations?
The world of AP is riddled with the latest terminologies such as automation, workflows, process
improvements, Content management, Character Recognition and such. Optical Character
Recognition is often considered by many process experts as the crux of a successful Invoice
Management automation strategy.
What is OCR?
OCR stands for Optical Character Recognition which helps an AP department to convert different
types of documents, such as scanned paper documents, PDF files or images into editable and
searchable digital data. For. E.g. A vendor may send an invoice in a paper format. This invoice can be
scanned upfront, captured by an OCR engine which can extract out relevant invoice data such as
invoice number, PO reference number, Date, amount, quantity etc.; data from both header and line
item level. The data captured can then be validated for correctness and discrepancies and
subsequently converted into Electronic Invoices which can then be posted into existing ERP system
such as SAP. While not technically e-invoicing, OCR does eliminate the need for an employee to key
in most of the invoice information manually. Studies shows that using a scan and capture center can
help an AP department rely less on paper-based cumbersome processes and therefore become less
prone to pitfalls associated with handling mass quantities of paperwork.
Key Benefits of OCR and Invoice Management:

Read and extract characters automatically from the scanned forms and documents,
unlocking the content for subsequent electronic processing
Tangible benefits reduces manual data entry errors, increases processing time, reduces
invoice processing cost over time.
Validation and Discrepancy check such as recognition of duplicate invoices by OCR.
Traceability of historic invoices and payments through electronic archiving.
Intangible benefits - better supplier relationships and supplier credit terms.
Do more with less resources thereby utilizing resources for more strategic tasks.

OCR vendor selection - Few key considerations:

Some key features to consider while selecting an OCR software includes

Full-Text recognition
Learning capabilities- Adaptive + Rule based learning is always optimal
Line item recognition
Allows multiple clients
Legal details recognition
Handwriting recognition
Vendor Bank accounts recognition

Integration into various ERP applications such as SAP for:

o Data validation
o Duplicate Checks
o Exception identification and routing
o Invoice Approval workflows
o Handling One Time Vendors
o Auto-posting of invoices
Pricing per invoice instead of per page

Setting the right Expectation:

First time OCR customers often show unbridled enthusiasm and have high expectations from the
technology. However, it is important to remember that while OCR and the associated technology is
indeed a magical solution, expecting a 100% success rate for all incoming invoices is not realistic.
Initially, OCR can only recognize standard invoices without specific adaption to customer
environment. However, overtime, the adaptive and rule based learning capability of OCR can enable
it to recognize and capture customer specific key data accurately with less manual validation thus
standardising non-standard invoices over time.
An organization must remember that technology enablement is never a be-all solution. For
achieving high automation rate the OCR customers and their vendors must collaborate to put in
place a set of OCR best practices.

Vendors are recommended to use the same invoice template every time
As a good practice, set all logos and images to between 240 and 300 ppi
Label Critical information such as Invoice Number, Date, vendor name etc.
Identify the document by having a document header
Avoid full or partial handwritten invoices
Use white paper and avoid using transparent paper with rear side information
Avoid ticks and stamps on printed areas

Avaali helps organizations significantly improve productivity and meet regulatory requirements by
ensuring full visibility into both data and content related elements of a business process. Our
consultants are experts in streamlining various processes such as AP. While many of them are ready
to embrace OCR and its integration with solutions such as OpenText VIM, we have helped them
understand that while OCR and Invoice Management cannot provide 100% automation for
everyone, they can significantly reduce the time, labour cost and inefficiencies associated with
manual paper-driven processes.