AI vs OCR in invoice processing
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Capturing invoices digitally significantly advances traditional paper-based processes, bringing greater efficiency and accuracy. However, relying solely on Optical Character Recognition (OCR) technology is not the ultimate solution for your business. OCR, while useful, is often too error-prone, slow, and ineffective for modern needs. It struggles with accuracy, particularly with complex layouts and poor-quality scans, leading to frequent errors that require manual correction. Additionally, OCR lacks the ability to truly understand the content it processes, merely converting characters into text without grasping their meaning or context.
Artificial intelligence addresses the shortcomings of OCR by not just reading characters but also interpreting and understanding them. AI adds context to the characters it reads, recognising and understanding their meaning. In the following chapters, you will learn how this can help your invoice management to reduce manual workload, enhance fraud detection, and de-risk compliance with company policies and external regulations.
The traditional way: Invoice processing with OCR
OCR is a technology designed to convert different types of documents, such as scanned paper documents or PDFs, into editable and searchable data. It works by analysing the patterns of light and dark on a page to recognise characters and words, then converting these patterns into digital text.
How OCR technology works
First, the document is scanned to create a digital image. It undergoes pre-processing to enhance quality, including techniques like de-skewing, removing noise, and binarisation (converting the image to black and white). OCR software then analyses the processed image, identifies patterns, and matches them to characters in its database to generate text. Finally, the generated text may be corrected and formatted to improve accuracy.
The advantages of OCR:
OCR converts physical documents into digital formats, making them easily searchable and editable
It reduces manual data entry by automatically extracting text from scanned documents
Digital documents can be stored, shared, and accessed more easily than physical copies
The disadvantages of OCR:
Misreads and incorrect characters are common, necessitating manual corrections
Low-quality invoice scanning (documents with smudges, marks, or skewed text) significantly reduce OCR performance
OCR only generates a text file from the scanned invoice image; it does not comprehend the information
Due to these limitations, relying solely on OCR for invoice processing can be inefficient and error-prone. If your business is eager to stay up-to-date and upgrade the invoice management process, you should opt for more robust solutions that not only digitise documents but also understand and process the invoice information contained within them.
The smart way: Invoice processing with artificial intelligence
This is where invoice processing with artificial intelligence comes into play. Unlike OCR, which merely converts text into a digital format, AI understands and processes the content of invoices, leading to a more efficient and accurate system.
How invoice processing with AI works
To automate invoice processing, critical information such as the invoice number, invoice date, and invoice amount from the documents must be extracted. This process involves advanced capturing technologies that employ special algorithms to search the text file for anchor words (e.g., “invoice number”) and locate the corresponding target values. However, interpreting non-standardised supplier invoices presents a significant challenge due to the varying locations and designations of anchor words from document to document. Rule-based capturing algorithms often fall short, achieving a readout rate of less than 50 per cent.
AI enhances this process by implementing machine learning and natural language processing technologies to improve the interpretation and extraction of data from invoices. Here’s how it works:
AI algorithms analyse the entire document, identifying key pieces of information regardless of their format or location.
AI doesn’t just read characters; it understands the context. For instance, it recognises that the sum of the invoice line items is the ‘Total’ – even if the invoice was missing the header for total.
AI systems learn from previous data, improving their accuracy and efficiency over time.
AI can adapt to new formats and changes in invoice layouts without requiring extensive reprogramming.
Invoice processing with AI is:
more accurate: AI significantly reduces errors by accurately interpreting and extracting data from various formats and layouts.
faster: AI processes large volumes of invoices quickly, speeding up financial workflows and reducing delays.
more effective: AI’s ability to understand and contextualise information leads to more effective data extraction and processing.
less risk: AI ensures that all necessary information is accurately captured and processed, aiding in regulatory compliance.
less work-intensive: AI handles the bulk of the data extraction and interpretation, greatly reducing the need for manual corrections and interventions.
By using AI, the capturing results can be significantly improved, achieving a success rate of over 95 per cent. This helps businesses implement a more efficient, accurate, and reliable system, enhancing their overall financial operations and reducing the workload on their staff.
Invoice processing with Yokoy’s AI
Yokoy’s AI and the full Yokoy suite upgrade invoice processing and management, providing your business with a comprehensive, automated solution. By leveraging advanced artificial intelligence, Yokoy automates the capture, processing, and management of digital and paper invoices, streamlining the entire accounts payable (AP) process and working hand in hand with your accounting software. Here’s how Yokoy’s AI-powered solution can transform a previously time-consuming invoice management.
Process invoices automatically
Yokoy’s AI captures and processes invoices automatically, accurately extracting key information such as invoice numbers, dates, and amounts. This eliminates the need for manual data entry, speeding up the invoice processing time.
Smart AP automation
Yokoy’s AI-powered solution allows you to manage invoices at scale and ensure timely payments to suppliers. The system integrates seamlessly with your ERP, providing real-time visibility into invoice statuses and preventing payment delays.
Save time by reducing the need for manual uploading, document processing, and approving invoices. Yokoy’s AI automates these tasks, allowing your team to focus on more strategic activities. Automatically extract invoice data and set up custom approval workflows to minimise mistakes and detect outliers in real time. This enhances compliance and reduces the risk of fraud.
Centralise your invoices
Consolidate your accounts payable management into one central system with Yokoy’s multi-legal entity setup. This reduces the need for multiple tools and simplifies invoice management across your organisation.
Manage multiple invoice formats
Easily capture and process invoices in various formats, including paper, PDF, and e-invoices. Yokoy connects with e-invoicing platforms to intake e-invoices directly into the system.
Yokoy’s AI extracts header and line item information from incoming invoices, even from unstructured data, and structures it for further use. This automation significantly reduces the time and effort required for invoice processing.
Match invoices with POs and goods receipts
Increase efficiency with AI-based invoice processing, smart line-item coding, and automated 2- and 3-way matching. Yokoy matches invoices to purchase orders automatically, ensuring compliance and preventing fraudulent activities.
Yokoy’s AI codes invoices are based on up-to-date master data from your ERP, and they are learning and improving with each processed invoice. This increases accuracy, especially for new suppliers, reducing the need for manual corrections.
Avoid unauthorised payments
Enhance transparency in invoice approvals to ensure only authorised payments are made. This helps avoid duplicate or erroneous payments and maintains control over the AP process.
Automate the identification of necessary approvals and streamline the routing process for faster supplier payments. Yokoy dynamically routes invoices to the appropriate approvers.
Enforce governance with custom workflows
Tailor workflows and pre-approval flows to automatically redirect invoices to the right approvers, enforcing governance across global entities and ensuring compliance. You can also automatically approve recurring invoices, avoid late payment fees, and make use of early payment discounts.
Stay audit-proof and simplify reporting
Yokoy simplifies invoice tracking and ensures an audit-proof management process with automated audit trails. Access all invoices, approvals, and bill payments in one place for easy financial reporting. By automating invoice processing and validation, you can streamline the monthly closing process. Yokoy ensures compliance through built-in rules, and syncs spend data in real time via API integrations.
Automation of invoice processing with GVB
Gebäudeversicherung Bern (GVB), which has been insuring buildings in Bern for over 200 years, is one of many businesses that trust Yokoy to streamline internal operations. The company’s finance team, responsible for processing invoices and employee expenses across the group, faced inefficiencies due to manual processing. Invoices arriving in various formats required manual conversion, data entry, and validation, leading to errors and delays. The cumbersome legacy expense tool further complicated expense management, causing delays in reimbursement and poor visibility into company spending.
GVB partnered with Yokoy to automate invoice and expense processing via our AI-powered platform. This solution independently processes various digital formats, reduces manual workload, and offers a user-friendly, mobile-first experience. It allows the finance team to manage the system autonomously and make changes as needed.
With Yokoy, GVB achieved significant improvements:
increase in operational efficiency by automating invoice reading, validation, and approval.
faster invoice processing
working hours saved annually
return on investment in the first year
"It is crucial for us to operate the entire system without extensive support. It was equally important that deputies could be easily defined so that workflows could be organised seamlessly."
Next steps
Transform your invoice processing and make it faster, more accurate, and more effective with Yokoy’s AI-powered solutions. By automating data extraction, reducing manual tasks, and enhancing compliance, Yokoy ensures efficient and reliable invoice management. Discover how Yokoy can improve your business operations by booking a demo today and get to know our advanced AI to see the benefits firsthand.
Simplify your invoice management
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