What is OCR invoice processing in accounts payable?

OCR (optical character recognition) invoice processing is reshaping how businesses approach accounts payable. By automating time-consuming tasks like data entry and invoice validation, OCR eliminates bottlenecks, reduces errors, and accelerates workflows, ensuring accuracy in AP workflows.

This guide breaks down the essentials of OCR invoice processing, its role in AP, how it works, and why it’s an essential component of AP automation.

What is OCR invoice processing in accounts payable?

This technology underpins invoice OCR, which is designed to streamline accounts payable workflows by digitizing invoices, purchase orders, and receipts, reducing the need for manual data entry. Invoice OCR captures key details—like invoice numbers, due dates, and vendor names—and integrates them directly into your accounting software or ERP system.

Now that we know what OCR is, let’s take a closer look at how the OCR process works.

How does OCR invoice processing work?

OCR invoice processing follows a clear, systematic workflow designed for accuracy and efficiency.

Here’s how it works:

1. Invoice receipt and digitization: Invoices (whether paper or digital) are scanned and uploaded into the OCR system
2. Data extraction: OCR software identifies and converts key information, such as invoice number, vendor name, and payment terms, into a machine-readable format
3. Validation and matching: The systems checks the extracted data against your purchase orders or vendor contracts to ensure accuracy
4. Routing for approval: Validated invoices are then forwarded to the right approvers based on predefined workflows or API integrations
5. Integration with ERP: Approved data is synced with your ERP or accounting system for proper recordkeeping and payment processing
6. Payment processing: Finalized invoices trigger automated payment workflows to ensure your vendors get paid on time

With the process defined, let’s break down how OCR technology directly impacts accounts payable workflows.

Manual AP process vs. OCR-powered AP process

Now that we’ve covered the steps OCR performs, let’s see how they can transform a manual accounts payable process.

Manual invoice processing is riddled with inefficiencies: chasing down invoices, manually entering data, and cross-checking information across multiple systems. OCR-powered processes automate these steps, reducing delays and errors.

Here’s how the two compare:

It’s no surprise that growing businesses turn to OCR not just for efficiency, but also to build a scalable AP process that can meet both their current and future needs.

Benefits of OCR

The true value of OCR lies in its ability to transform time-consuming AP tasks into seamless, automated workflows that drive impact. The main advantages of OCR in AP include:

• Reduced manual data entry: OCR eliminates tedious tasks, freeing teams to focus on strategic work
• Error reduction: Automated validation minimizes the risk of human error
• Streamlined approvals: Automated workflows ensure faster approvals
• Improved payment timing: Speeds up processing time to capture early payment discounts and avoid late fees
• Enhanced compliance: Provides clear audit trails and secure storage for regulatory needs
• Scalability: Handles a high volume of invoices without additional resources

Case study: How Ramp’s OCR transformed AP at The Second City

Manual processes were slowing down The Second City’s accounts payable team. They needed a system that could keep pace with their operations, but outdated tools created bottlenecks, delays, and costly errors.

Initially, The Second City was using NetSuite Bill Capture. But after implementing Ramp’s OCR technology, The Second City was able to transform their AP workflows to a more streamlined process. Ramp Bill Pay automated repetitive tasks like coding invoices and chasing receipts while seamlessly recognizing vendors, reading line items, and applying accounting rules.

Frank Byers, Controller at The Second City, was initially skeptical:

“When we moved to Bill Pay, I was hesitant because we were promised the same type of functionality as our previous technology, which didn’t work. But Ramp’s OCR works seamlessly—it not only recognizes the vendor but reads each individual line item and uses accounting rules to code them correctly. That made adopting Ramp Bill Pay a no-brainer.”

And the results speak for themselves:

• Expense reporting expedited by 8 days, eliminating operational delays
• $40,000 in annual savings by consolidating systems
• Bills processed twice as fast, freeing up valuable time

Ramp didn’t just fix The Second City’s broken workflows. It redefined them, helping their team focus on the work that matters most.

A month of work done in minutes.

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Make AP effortless with Ramp’s OCR technology

Not all OCR solutions are created equal. Ramp’s technology goes beyond basic automation, delivering precision, scalability, and seamless integration to transform how your AP team works.

Don’t just take our word for it. Here’s what Frank Byers had to say about Ramp’s impact:

“Switching to Ramp for Bill Pay saved us not only time, but also a significant amount of money. Our previous AP automation tool cost us around $40,000 per year, and it wasn’t even working properly. Ramp is far more functional, and we’re getting the benefits at a fraction of the cost.”

What could your business achieve with all that time and money saved? Try Ramp's invoice management software and see how our OCR technology can help you create a more efficient AP process.