The accounting sector is no stranger to the benefits of digitization, but keeping hard copies of documents is also here to stay, as there are a lot of legal constraints. However, in a world aiming to become paperless and as efficient as possible, you need a quick option to turn your printed invoices into digital data, quickly and reliably.
This is where optical character recognition (OCR) technologies can help. An OCR tool takes scanned images and turns them into digitally editable formats. This means that through technology, accountants will be able to focus more on the core aspects of their job and less on the administrative ones.
What Is OCR?
Optical character recognition has been around for at least a century, starting with Morse code readers, if we don’t take into consideration early machines developed in the 1870s to help the blind read.
Simply put, it is a way for machines to recognize symbols and interpret them by comparing the processed characters to a set of predefined symbols and matching them based on likelihood.
Is OCR Right for Accounting?
In the case of accounting documents, the challenge is to read the source document as accurate as possible. Any minor error can have disastrous outcomes. Just imagine the difference between reading 8,200 and 8.200 when it comes to the value of an invoice.
Another problem of OCR for accounting is the format of most documents. Some of them follow a tabular format, while others are free-form and there is no specific standard to them. In this case, even if the program can recognize text and numbers, to be efficient, it still needs to make sense of them. This is where intelligent character recognition (ICR) comes into play.
Ways to Use OCR in Accounting
Digitization offers countless benefits, from cost-cutting to time-efficiency and better document accuracy. Here are a few reasons to consider OCR for accounting.
Accurate Data Entry
A great deal of the accounting work consists of data entry into designated fields. A consistent OCR tool can cut the time to enter data more than in half.
If the accuracy problem is solved, OCR can provide better results than humans since software can never be tired or bored. If an OCR solution is coupled with a cross-checking tool, it can also offer validation of the entered data.
Eco-friendly Document Management
Recent ecological concerns have made all organizations more aware of the need to go paperless and care more about the environment.
Keeping documents in the cloud is eco-friendlier than printing them and storing for many years. The ability to retrieve anything in just a few clicks is also a bonus.
Faster Invoice Processing
With the help of OCR, invoices can be automatically processed and paid. The software can find critical elements like date, invoice number, vendor details, amount, and more.
OCR software coupled with an AI-processing unit can scan paper-based invoices and send the data directly to the integrated bookkeeping system. This is the first step toward automating invoice processing. However, this makes sense if you have a couple of hundred invoices per month and a steady incoming flow of new clients.
Processing invoices with the help of OCR also means fewer costs as you can redirect your workforce to more value-adding tasks and save on low-level but time-consuming ones.
If documents are digital, it becomes easier to scan and index them, while external auditors can have more convenient and comprehensive access to these documents for evaluation. With OCR-generated documents, it is no longer necessary to invite auditors on-premises. Documents can be uploaded to a safe server and analyzed in-depth faster.
Furthermore, having data digitized means that cross-checking between documents can be done faster and more reliably. This also opens the door for remote audits as well as travel document uploads in real-time, which shortens the reimbursement cycle.
In the future, we can even expect automated audits conducted by AI, at least in the preliminary phases.
Apart from these major use cases, there are also smaller benefits which OCR can bring to an accounting company or department.
The first indirect benefit is a better use of the working time, which can foster better work engagement and positive attitude toward the employer. Also, there are clear indications that OCR can lead to increased productivity and better collaboration between internal teams and external auditors.
Next, there are less human mistakes and better data accuracy.
Last but not least, this offers increased security of data since it can be encrypted on servers and protected by user authentication policies. This level of security is not easily achieved with paper documents, which can also be destroyed by fire or water.
What to Ask for from Your OCR Provider
Since accuracy is crucial in accounting, ask your provider to show you proof-of-accuracy reports with the results of over 99%. Since the GAAP requires 100% accuracy to comply with standards, you will still need to check for errors with lower-quality input documents.
If you are working with foreign partners or clients, you could have invoices in more than one language. Be sure to ask your provider to offer support for all the languages you intend to use.
Since OCR for accounting is only a supporting system, make sure it communicates flawlessly with your current business tools. You need to check that the connections perform well and securely.
Last but not least, be sure your OCR system will support batch processing for better efficiency.