Does Xero have OCR? How it works, costs, and alternatives

Xero doesn’t have a built-in OCR solution, but it does provide automated data capture through Hubdoc. For businesses using Hubdoc as a part of their Xero subscription, it’s a convenient tool for basic invoice automation.

However, for companies with higher invoice volumes, complex approval workflows, or the need for PO matching, third-party AP automation solutions may offer greater efficiency.

Let’s break down how Xero OCR (via Hubdoc) works and explore alternatives for businesses needing more advanced invoice capture capabilities.

What is Xero OCR?

Xero OCR refers to Xero’s document data capture capabilities, primarily powered by Hubdoc, a tool included with Xero business subscriptions.

While Xero itself lacks a built-in OCR tool, Hubdoc extracts key details from bills, receipts, and bank statements. Businesses can upload documents via email, mobile app, or scan, allowing Hubdoc to automatically pull vendor names, invoice numbers, amounts, and due dates to create draft transactions in Xero.

How does Xero OCR work?

Xero OCR, powered by Hubdoc, automates document processing and reduces manual data entry through the following key capabilities:

• Automated document capture: Users can email, scan, or upload bills and receipts, and Hubdoc extracts key details.
• Data recognition: OCR extracts vendor names, invoice numbers, amounts, and due dates, reducing the need for manual entry.
• Xero integration: Extracted data is used to create draft invoices, bills, and transactions within Xero.
• Bank statement extraction: Hubdoc can convert PDF bank statements into CSV files, making it easier to import transaction data.
• Cloud-based document storage: All uploaded files are stored in Hubdoc, searchable and accessible from anywhere.

How much does Hubdoc through Xero cost?

To use Xero OCR, businesses must have an active Xero subscription with Hubdoc included. Hubdoc is included with Xero’s Business Edition plans. However, businesses using Xero Partner Edition may need to purchase Hubdoc separately, since it’s not bundled with their subscription.

Since Xero follows a tiered pricing model, the cost of accessing Hubdoc depends on the chosen Xero plan. Businesses requiring advanced AP automation features beyond OCR may need to explore additional integrations, such as third-party AP automation software. Pricing details for Xero plans can be found on Xero’s official website.

What are the benefits of invoice capture?

Invoice capture and OCR provides several advantages for businesses looking to simplify invoice processing:

• Reduces manual workload: Automating data extraction minimizes time spent on manual entry, allowing AP teams to focus on reviewing and approving invoices.
• Speeds up invoice processing: By eliminating the need to enter invoice details manually, OCR helps businesses process supplier bills faster.
• Improves financial accuracy: OCR reduces human input errors, ensuring that key invoice details (like amounts and due dates) are captured correctly.
• Improves cash flow control: Faster invoice approvals and automated workflows help businesses manage payments more predictably, reducing late fees and optimizing cash flow.

Main challenges of Xero OCR

While Xero OCR via Hubdoc helps businesses automate invoice and receipt processing, there are certain limitations that can impact efficiency and scalability. Here are the main challenges to consider:

1. No built-in purchase order (PO) matching

Unlike some advanced AP automation solutions, Hubdoc doesn’t support three-way PO matching. Businesses that require automated invoice-to-PO reconciliation must manually verify invoices against purchase orders in Xero or use third-party AP automation tools to fill this gap.

2. Limited support for high-volume processing

Hubdoc is designed for small businesses, meaning it may not be ideal for companies processing a high volume of invoices. There may be a limit on bulk-processing capabilities or user permission structuring. Large businesses may need to explore alternative AP automation solutions for handling extensive invoice workflows.

3. Limited storage and document retrieval inefficiencies

Based on user feedback from G2, a leading software review platform, some users report that backtracking older invoices and receipts can be difficult, with the search and retrieval process being time-consuming and less intuitive compared to more advanced AP automation tools.

How to choose the right invoice capture software

Whether you're evaluating invoice capture tools for the first time or considering a switch from your current system, the key is finding a solution that reduces manual work, improves AP efficiency, and integrates seamlessly with your existing workflows. The right software should streamline invoice processing, minimize errors, and support your business as it scales.

Here are five critical factors to consider when selecting an invoice capture solution:

1. Smart invoice processing and automation

The best invoice capture software eliminates repetitive data entry by using AI-powered OCR to extract key details like vendor names, invoice numbers, and amounts with high accuracy. Advanced solutions continuously improve through machine learning, reducing the need for manual corrections over time.

Look for a tool that supports:

• Automated matching with purchase orders to minimize discrepancies
• Smart learning capabilities that recognize recurring vendor invoices
• Multiple invoice formats, including PDFs, email attachments, and scanned documents

2. Seamless integration with accounting software

If you're using an ERP or accounting platform, your invoice capture solution should integrate without adding unnecessary steps. The ideal tool should:

• Sync invoice data automatically, eliminating manual transfers
• Support automated GL coding and approval workflows to speed up reconciliation
• Offer two- and three-way matching to verify invoice accuracy
• Prevent duplicate entries and misclassifications during data sync

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3. Flexible approval workflows and vendor collaboration

A rigid approval process can slow down invoice processing. The system should adapt to your organization’s approval structure while making vendor interactions more efficient.

Consider:

• Automated approval workflows that route invoices to the right approvers
• Role-based permissions to assign approvals based on invoice amount, department, or vendor
• Vendor self-service options to reduce back-and-forth communication by allowing vendors to submit and track invoices independently

4. Security, compliance, and fraud prevention

Because invoices involve financial transactions, strong security and compliance features are essential. A reliable invoice capture tool should:

• Maintain a detailed audit trail of invoice actions for transparency
• Detect duplicate invoices and potential fraud before payments are processed
• Ensure tax compliance to help businesses meet regulatory requirements

5. Scalability, pricing, and ease of use

The right invoice capture solution should meet your current needs while scaling with your business as it grows. Key considerations include:

• Pricing model: Is it based on invoice volume, users, or a flat-rate subscription?
• Scalability: Can it handle higher invoice volumes efficiently without excessive costs?
• User experience: Does it have an intuitive interface that minimizes training time?

By prioritizing automation, integration, approval flexibility, security, and scalability, businesses can choose an invoice capture solution that enhances efficiency without adding complexity to their AP processes.

How Ramp Bill Pay provides advanced OCR and AP features

Before choosing an invoice capture solution, it’s important to evaluate whether it meets your business’s needs—especially if you rely on Xero for accounting. While Xero OCR, powered by Hubdoc, helps businesses digitize and extract invoice data, its limitations in high-volume processing and PO matching mean some businesses may require additional automation tools.

Here’s how Ramp Bill Pay compares across key invoice automation features:

Why the right OCR solution makes all the difference

An effective OCR solution should integrate smoothly with your AP workflows, reduce inefficiencies, and scale with your business. While Xero OCR via Hubdoc provides essential automation for small and mid-sized businesses, companies with more complex workflows may benefit from third-party AP automation tools that offer more advanced features.

That’s why more than 7,000 businesses trust Ramp to accelerate invoice processing and reduce errors. But don’t take it from us—Alejandro, CFO at Roof Squad, after adopting Ramp Bill Pay, said:

“The way bill pay works now is super easy. That was such a tedious process before. Now it’s just a couple clicks away, saving us about 10 hours a week, and reducing the number of errors we make.”

Investing in a flexible, high-performing accounts payable system with invoice scanning and OCR leads to faster approvals, fewer manual corrections, and a more efficient AP process.

Start processing invoices faster with Ramp Bill Pay.