In today’s competitive business world, companies constantly look for ways to enhance productivity and reduce costs. Thanks to technological advancements, businesses are able to achieve this by automating and streamlining their operations. One such technology is OCR or optical character recognition. While OCR has many use cases for businesses, one area where it has proven to be highly valuable is in automated invoice processing. Today, specialized OCR solutions are available for invoice processing, such as an invoice OCR API.
These APIs leverage advanced machine learning algorithms to extract data from invoices automatically. Invoice processing automation also involves automatic data validation and verification. Finally, the data is delivered to the organization’s accounting or ERP software for approval and payment processing.
In this article, we’ll discuss the role of an invoice OCR API in automating invoice processing and its advantages.
The challenges of traditional invoice processing
First, let’s discuss how traditional invoice processing works:
- An employee extracts relevant data from invoices manually
- The next step involves manual data entry onto a computer
- Next, a staff member validates if the extracted data is correct
- The data is then matched against purchase orders
- Finally, the data is sent for approval and payment processing
There are many limitations and issues with this process. First, it is pretty time-consuming. Manual data extraction, entry and approval processes often lead to delayed payment processing. This negatively affects the cash flow and overall productivity. Manual invoice processing is also prone to human errors, such as miscalculations and typos. These errors prolong the average processing time and can also cause financial losses. Moreover, manual invoice processing requires various staff members, which results in higher operational costs.
What is an invoice OCR API?
OCR is an advanced technology that automatically extracts text from printed and digital documents. Advanced OCR solutions can even extract data from handwritten documents accurately. OCR leverages machine learning and neural networks to extract and transform data into machine-readable text.
An invoice OCR API is a specialized OCR solution for extracting data from invoices and financial documents. Such APIs can accurately extract specific data from invoices, such as:
- Vendor name
- Total amount
- Invoice number
- Dates
- Line items
Moreover, advanced invoice OCR technology can efficiently recognize various invoice layouts and formats. Hence, they can extract data from structured and unstructured invoices. This feature is essential as different vendors/industries have different invoice layouts/formats. Another key feature of an invoice optical character recognition API is that we can integrate them with other software systems seamlessly. For instance, an invoice OCR API can integrate with accounting or ERP software to automate the entire process, including payment processing.
How does automated invoice processing work?
Here is how invoice processing automation works:
Invoice scanning and data extraction
The first step involves scanning the printed and digital invoices and uploading them to the automated processing system. The integrated invoice OCR API then extracts invoice data, such as invoice numbers, vendor details, and total amounts.
Validating data
The automatically extracted data is then validated based on pre-defined company rules. This helps ensure that the extracted information is correct and accurate.
Data Verification and exception handling
Next, the integrated data verification tools compare the structured data with relevant purchase orders, contract documents, etc. This ensures the data is correct and eliminates the manual cross-referencing process. If the system detects any discrepancies or missing data, it flags and reports the issues for further investigation and resolution.
Integration with accounting and ERP software
Integrating the invoice OCR API with accounting or ERP software and implementing an automatic approval workflow can automate the entire process. This automated system can process invoices, send them for automatic approval, and initialize payment processing.
Advantages of automating invoice processing with an Invoice OCR API
Improved accuracy
With OCR, businesses can automate invoice processing and accounts payable processes. Specialized invoice OCR solutions can extract data from invoices with high accuracy. These tools are designed to recognize various types of invoice formats and layouts. This eliminates the risk of human errors associated with manual data extraction.
Cost savings
Automated invoice processing helps businesses save costs associated with manual labor for data extraction, entry, and processing. Moreover, automation reduces errors that could have caused financial losses.
Time savings
Invoice processing automation speeds up the entire process, from data entry to approval and payment processing. Hence saving time and streamlining workflows.
Increased efficiency
Since OCR automates data extraction from invoices, it eliminates the need for manual data entry. This accelerates the processing time. Hence, businesses can handle high volumes of invoices with better efficiency.
Fraud detection
Invoice processing automation involves data extraction, validation and verification. This helps ensure the data is accurate and correct, making it easier to detect fraudulent activities, such as manipulation of invoices.
Better visibility
By automating invoice processing, businesses can track the status of invoices in real-time. They can monitor the progress of invoices, detect bottlenecks, and improve their operations.
Also Read: Real-world use cases of an OCR API.
Example of an invoice processing OCR tool: Filestack OCR
Filestack provides a comprehensive suite of APIs and tools for:
- File uploads
- Online file delivery
- Transformation
Filestack also offers an advanced OCR functionality as a part of its Processing API. Filestack’s OCR API leverages robust digital image analysis to detect features character-by-character. This enhances the accuracy of text detection. The API is designed to identify various invoice layouts and formats accurately. Moreover, you can use the Filestack OCR API to extract data from various other documents, such as:
- Business cards
- Credit cards
- Driver’s licenses
- ID cards
- Various types of financial documents
- Tax documents
- Passports, and more.
Advanced document detection and pre-processing solutions
Filestack OCR also leverages highly advanced document detection and pre-processing solutions for improved accuracy. The document detection system uses sophisticated supervised and unsupervised machine learning algorithms. This allows the OCR engine to efficiently detect complex documents, such as rotated, folded, or wrinkled documents. Hence, the OCR engine extracts data with higher accuracy.
The figure below depicts the complete Filestack OCR data extraction process:
Image enhancements
You can also leverage the Filestack Processing API to transform scanned images/documents and improve their quality. This allows for enhanced OCR data extraction accuracy. Here are some ways you can transform your scanned images:
- Upscale images
- Crop images
- Resize images to standard size
- Remove noise from images
- Convert the image file to a unified format
- Compress images
- Apply various image enhancements and filters
Implementing invoice OCR APIs
A good OCR API like Filestack OCR integrates seamlessly with existing workflows and systems. Here are common steps for implementing Filestack invoice OCR API:
- Sign up to create a Filestack account
- Obtain your unique API key from your Filestack dashboard
- Implement Filestack file upload using Filestack JavaScript SDK.
- Upload your file/image/invoice with Filestack.
- Generate “Security Policy” and “Signature.” In Filestack, these two parameters are implemented for security purposes and are necessary to perform OCR. A security policy is essentially a set of rules defining how a file can be processed or accessed. Signature is associated with the Policy, and it ensures that the API request complies with the policy. To generate Policy and Signature, go to your Filestack dashboard and then go to the “Policy and signature” tab.
- Use the following URL to perform OCR with Filestack:
https://cdn.filestackcontent.com/security=p:<POLICY>,s:<SIGNATURE>/ocr/<HANDLE>
*Replace Policy and Signurate with your generated POLICY and SIGNATURE. Also, replace HANDLE with the file handle returned by Filestack when your file is uploaded.
Implementing Filestack OCR
The steps below show how to test Filestack OCR:
We’ll perform OCR on the following image:
1) Go to Postman and create a new request
2) Enter the following URL in Postman’s GET method
https://cdn.filestackcontent.com/<FILESTACK_API_KEY>/security=p:<POLICY>,s:<SIGNATURE>/ocr/<EXTERNAL_URL> 
3) Go to your Filestack dashboard, then go to the security tab and click “Policy & Signature.”
4) In the “Policy & Signature” section, add an expiration date and check the following boxes:
5) You’ll now get a Policy and Signature that you’ll need to perform OCR.
6) Copy and paste the Policy and Signature in Postman
Remember to replace <FILESTACK_API_KEY> with your API key available in your Filestack dashboard. Also, replace <EXTERNAL_URL> with the actual URL of the image/invoice. If you’re using Filestack file uploader to upload your invoice, replace the <EXTERNAL_URL> with the <HANDLE> returned by Filestack. Finally, send the API request.
Here is the response to the Filestack OCR API request:
{
"document": {
"text_areas": [
{
"bounding_box": [
{
"x": 187,
"y": 170
},
{
"x": 293,
"y": 170
},
{
"x": 293,
"y": 226
},
{
"x": 187,
"y": 226
}
],
"lines": [
{
"bounding_box": [
{
"x": 188,
"y": 170
},
{
"x": 266,
"y": 171
},
{
"x": 266,
"y": 181
},
{
"x": 188,
"y": 181
}
],
"text": "Invoice to:",
"words": [
{
"bounding_box": [
{
"x": 188,
"y": 170
},
{
"x": 239,
"y": 171
},
{
"x": 239,
"y": 182
},
{
"x": 188,
"y": 181
}
],
"text": "Invoice"
},
{
"bounding_box": [
{
"x": 245,
"y": 171
},
{
"x": 259,
"y": 171
},
{
"x": 259,
"y": 181
},
{
"x": 245,
"y": 181
}
],
"text": "to:"
}
]
},
{
"bounding_box": [
{
"x": 187,
"y": 188
},
{
"x": 263,
"y": 188
},
{
"x": 263,
"y": 197
},
{
"x": 187,
"y": 198
}
],
"text": "Dwyane Clark",
}
Note: This is just a fraction of the response. You can see the full API response in Postman.
Best Practices and Considerations
- Clearly define your objectives for integrating an invoice OCR API and choose the OCR API accordingly.
- Create a standard invoice layout or format for enhanced data extraction accuracy.
- Automate the validation and verification of the extracted data
- Integrate the invoice OCR API with ERP or accounting software
- Create automatic approval workflows
- Ensure data security and privacy of sensitive financial data by implementing strict access controls
- Monitor the performance of the automated invoice processing system regularly and identify areas for improvement
Conclusion
Invoice processing is a crucial process in any business. It involves extracting data from various invoices and entering it into the computer. The data is then validated, verified, and sent for approval. However, manual invoice processing is time-consuming and labor-intensive. That’s why organizations worldwide are now automating invoice processing. One of the key technologies that has revolutionized invoice processing automation is OCR. It leverages machine learning to automate invoice data entry.
Sign up for Filestack today and automate your invoice processing with Filetsack OCR API!
FAQs
How does an Invoice OCR API improve invoice processing efficiency?
An invoice OCR API automates data extraction from invoices, eliminating manual data entry. It speeds up the processing time and minimizes errors. This allows for quicker invoice reconciliation and approval. This efficiency boost not only saves time but also resources. Hence, OCR invoice automation makes the entire invoicing process more streamlined and accurate. It also helps with efficient invoice management.
Can invoice OCR APIs be integrated with existing financial systems?
Yes, most invoice OCR APIs are designed for easy integration with existing financial systems and software. They typically offer flexible integration options. This allows businesses to incorporate OCR capabilities into their current invoicing workflows seamlessly. Thus enhancing their existing financial infrastructure with minimal disruption.
Are Invoice OCR APIs secure for handling sensitive financial data?
Security is a top priority for Invoice OCR APIs. Security is particularly essential when handling sensitive financial data. These APIs usually employ advanced security measures, such as data encryption and secure access protocols. This ensures that all invoice data is processed and stored securely, protecting it from unauthorized access or breaches.
Sidra is an experienced technical writer with a solid understanding of web development, APIs, AI, IoT, and related technologies. She is always eager to learn new skills and technologies.