Last editedJun 20223 min read
From data entry to invoice creation and updating financial statements, accounting is by its nature very detail oriented. Fortunately, automated accounting software lightens the load using technology like optical character recognition, or OCR. So, what is the OCR meaning in business, and how does it work? We’ll explore these questions below.
What is optical character recognition in accounting?
Short for optical character recognition, OCR is a type of technology that converts scanned images into digital files. In the context of accounting, this means it is used to scan your receipts, invoices, purchase orders, and other relevant documents. These might be photocopied or photographed using scanning apps before they’re converted into digital files that your accounting software can edit. Optical character recognition in accounting is also used to extract document data, feeding it automatically into your systems to eliminate the need for manual data entry.
How does OCR in accounting work?
No matter the type of OCR software, the general process remains the same:
The software receives a paper file, digital image, photocopy, or other source material.
It processes the text characters and converts them into a format that can be searched and managed electronically. Document data is recorded for cloud-based storage and manipulation.
While scanning data, OCR solutions also prepare the data for the business using predefined rules.
Files are sent to corresponding parties once they’ve been processed, usually accessible through the existing accounting platform with built-in integration.
What are the benefits of OCR in accounting?
Optical character recognition offers an array of benefits to accounting departments. Here are just a few examples of how it can transform your processes.
OCR accounts payable benefits
Apart from general accounting tasks, OCR accounts payable benefits include the ability to boost efficiency using automation. Manually entering each document can be tiring, with the potential for error when employees need to input vast quantities of payment data. With OCR technology, the data is scanned and input into the system directly from the source documents for greater accuracy. OCR systems can process high volumes of invoices from multiple vendors, converting them into the same format for processing and approval.
OCR payment processing benefits
Along these same lines, automating the invoicing process means that it’s easier to process payments. Whether it’s payroll, employee expense reimbursements or payments to outside vendors, you can use a data-led approach with this technology. OCR technology enables automatic check deposits from your smartphone. Rather than physically visiting the bank and making an in-person deposit, your phone’s app uses OCR technology to take relevant data from the check’s image to automatically transfer it to your account.
OCR auditing benefits
The IRS recommends retaining all expense receipts for as long as three years in case of an audit. Whether you’re conducting an internal audit or get a phone call from the IRS, using OCR technology ensures that your expense reports are current and accurate. Auditors are better able to process expense documents and budget reports using the transaction’s data, rather than poring over lengthy files to try and find what they’re looking for.
The benefits of going paperless
Apart from saving time and improving accuracy, OCR technology offers an easy way to make your office a little greener by going paperless. With a combination of invoice and receipt scanning apps alongside automated accounting software, you can eliminate paper documents from your workflow. There’s no need to store, print, photocopy, or file paper copies of each accounting document. With the security of cloud-based technology, your files are kept safer at the same time. While it’s not uncommon for paper receipts to go missing, there’s less chance of losing important data with OCR in accounting.
Is an automated OCR accounts payable system right for you?
As the world transitions from paper-based to digital systems, accounting departments can benefit from the convenience and accuracy of automation. Bringing optical character recognition into your workflow ensures that you can manage bill payments, expense tracking, and more all from your smartphone. A cloud accounting solution not only helps you go paperless, but integrates easily with payments solutions like GoCardless to reduce the cost of financial admin. GoCardless integrates with over 300 partners, including top cloud-based software like Xero and QuickBooks – many of which utilize OCR technology.
With digital records, your organization’s accountants also have a more efficient retrieval process to pinpoint the documents they need. This gives accountants and analysts more time to focus on specialty aspects of the job, rather than wasting time on data entry.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.