Many business workflows include receiving documents in form of receipts, invoices, printed contracts, etc. Managing and storing such a large volume of paperwork requires significant time and space. Also, It becomes an increasingly challenging task for businesses to fulfill customer demand and stay competitive in their respective industry. That is why modern business owners are adapting Optical Character Recognition features in their software to seamlessly align their processes and save time and reduce operational costs.

Here, in this blog we will discuss what OCR is, its process, benefits and real-world use cases with a focus on how VasyERP empowers this technology.

What is OCR (Optical Character Recognition)?

OCR or Optical Character Recognition also referred to as text recognition technology is the process of extracting data from an image or digital documents including invoices, PDFs, etc. and converting them into editable and searchable text format. Importantly, OCR helps to “read” the characters in an image or document and translates them into machine-readable format.

Eg: If you scan an invoice or an image of a typed or printed digital document, then OCR will process the invoice and scan the letters, numbers, and symbols mentioned in it. Once the data is extracted or scanned, you can easily edit, search and save it like any other editable document in your system. OCR is used for multiple purposes like document digitization, data extraction from invoices or receipts, and automating data entry work in the business.

Did you know?

According to the recent study, the AI-powered OCR (Optical character recognition) market is projected to grow at a Compound annual growth rate (CAGR) of 15.59% reaching US$ 23.456 billion in 2030 from $11.369 billion in 2025.

Use of Artificial Intelligence can benefit OCR software by implementing modern intelligent character recognition (ICR) for scanning handwriting and multiple languages. Companies offer their customers with OCR features in their software, allowing them to convert the digital documents into editable formats reducing the need for manual work. Businesses can use the data to perform analytics, automate their workflows, optimize their store operations, and enhance their sales output.

There are four types of OCR depending on the task they resolve:

• Intelligent Word Recognition (IWR): IWR recognizes restricted handwritten words instead of individual characters.
• Intelligent Character Recognition (ICR): ICR is an updated version of OCR that can easily recognize handwritten characters.
• Optical Word Recognition (OWR): OWR identifies whole words from handwritten documents.
• Optical Mark Recognition (OMR): OMR identifies the marks in specific areas of documents.

How does OCR work? 

The OCR software works by leveraging the below mentioned steps: 

Step 1: Image Acquisition

A scanner scans all the documents and then converts the digital document into binary data. The digitized image or bitmap is analyzed for light and dark portions. After that, the program labels the light sections as the background and the dark portions as characters to be recognized.

Step 2: Pre-processing

The OCR software now pre-processes photos or documents to minimize noise and distortions, enhancing recognition quality through cleaning techniques like:

• De-skew and rotation : Applying several filters to make text lines absolutely vertical or horizontal and to adjust the image orientation.
• Despeckle : Smoothing edges by eliminating positive and negative spots.
• Binarization: Converting a color or grayscale image to black-and-while pixels to clearly distinguish between the characters to be read which are in black pixels and the white pixels (background).

Step 3: Text Recognition

Images of light and dark are extracted from the scanned paper. The darker portions of the pictures are identified as the text has to be decoded, and the lighter portions are identified as background. After that, darker regions are examined to find letters or numbers. An algorithm is then used to identify the characters or numbers.

These algorithms are able to identify features and patterns:

• Pattern Recognition: Pattern recognition is a process in which OCR software is “Trained” with text examples to identify various fonts and formats in captured documents or images. Each blend of shape, scale, and font is known as “Glyph”. For this to process easily, the characters must be in a font that the OCR software has worked before.
• Feature Recognition: Feature recognition is used when OCR software is monitoring a font that it has not been trained before. To identify the characters in the digital document, OCR uses rule-based on the characteristics of a specific letter or number. Examples of features include number of angled lines, line intersections, curves, and loops in a character.

Step 4: Layout Recognition

Comprehensive OCR program will analyze a paper’s structure. It will divide the page into multiple segments including text blocks, tables, or images. The lines are bifurcated into words and then into characters. After the characters are differentiated, the software will compare them with a collection of pattern images. After all the processes, the program will deliver the recognized text.

Step 5: Post-processing

Once after the extraction of the data, the software will convert the extracted data into a computerized file which will then be in an editable format. Some of the OCR systems will keep both the input image and post OCR-versions for simpler comparison and more thorough document management.

Key Benefits of OCR for Businesses

Optical character recognition (OCR) delivers several benefits to owners, enhancing multiple aspects of business operations and service delivery.

• Saves More Time: OCR quickly extracts text from documents, saving more time and focusing on higher-value tasks.
• Reduce Errors: By automating the data extraction process, OCR lowers the chance of human error while manually entering data. This ensures accurate and reliable data processing.
• Easy Searchability and Accessibility: Without referring to all the files, users can easily search for the particular information from the digitized documents. 
• Cost Savings: Automated data entry helps in reducing employee costs, reduces printing and storage expenses, and also lowers the risk of human mistakes. 
• Improved Data Security: Users can encrypt, store and back up digital documents, delivering enhanced protection than the physical files against loss or unauthorized access. 
• Third-Party Integrations: VasyERP’s OCR integration capabilities allow businesses to seamlessly enhance their ERP systems and improve overall workflow automation with intelligent data extraction features.

Best Uses of OCR in Different Industries

Optical character recognition has changed the way the business digitizes and processes their workflows. By converting the documents including scanned papers, invoices, or images into editable and searchable data, OCR boosts productivity, drives efficiency, and brings innovations across multiple industries. Check out how industries are leveraging OCR to align their operations.

1. Manufacturing

OCR in the manufacturing industry enables the automation of data entry, aligns inventory monitoring, digitizes quality control, enhances accuracy in labeling, reduces manual errors and boosts efficiency.

2. FMCG

FMCG industry simplifies invoice processing, automates inventory management, enhances supply chain tracking, and improves accuracy in data entry and product labeling.

3. Retail

OCR helps in enhancing retail operations by scanning and automatically extracting required information from invoices, purchase orders, etc. OCR converts these data into editable format for faster data processing. Retailers prefer to integrate OCR features in their software to reduce the queues at billing counters, manage inventory and improve their overall business operations.

4. Banking & Finance

OCR helps to automate the cheque clearing process, improves document management, and speeds up the KYC verification process. Banks and the finance sector prefers to use OCR to extract data from scanned documents, and gets rid of manual entry and enhancing accuracy. OCR also allows digital audits and eases compliance by converting paper documents into searchable, editable and structured format resulting in reduced operational costs and enhanced efficiency.

5. Logistics

Manually processing a huge volume of data is a challenging and time-consuming task. Even if documents are converted to PDF formats, it becomes difficult for users to extract the required data. OCR helps to verify the captured data, resulting in getting rid of errors, and helps to streamline the invoice processing, packaging lists, and manages bills of lading.

VasyERP’s New AI-Powered OCR Features for Businesses

VasyERP has launched a latest feature “AI-powered OCR” to help you smartly manage documents and quickly extract data from supplier bill without the need of any manual work.

This modern feature easily scans important details like dates, totals, customer names, and much more. It supports multiple languages. You can scan and process hundreds of documents in just a few seconds. VasyERP’s OCR can easily integrate into your existing ERP or POS systems. It automates data entry, reduces human errors, and speeds up your daily tasks. Cloud-based OCR technology is accessible from anywhere, anytime. It comes along with smart layout detection which simplifies the understanding of tables, sections, and formatting in every document. Also, its smart layout detection enables it to precisely interpret sections, tables, and formats across multiple types of documents.

• Error reduction
• ERP and POS integration
• Cloud-Based accessibility
• Smart layout detection
• Scans important details including dates, totals, and customer names

VasyERP’s OCR feature is developed for businesses looking to boost their productivity and grow smarter. Try it today and experience a smarter way to manage your data easily.

Future of OCR: AI & Automation Trends

The future of Optical Character Recognition (OCR) is being revolutionized with the growth in Artificial Intelligence (AI) and automation. AI-powered OCR can easily detect patterns, extract data from multiple documents including invoices, ID cards, or receipts. AI and automation will help OCR to manage multiple languages, layouts, and formats. Also, OCR will help businesses to speed up their workflows, reduce manual work, and enhance data accuracy.

Key Trends of OCR

1. AI-Powered OCR

AI-powered OCR software leverages advanced algorithms and predictive analytics to enhance accuracy, flexibility, and scalability. These advancements in AI (Artificial Intelligence) will have an important role in challenging identity theft by providing a strong authentication process and fraud detection capabilities.

2. Cloud-Based OCR

Cloud-based OCR services provide companies an affordable and scalable way to process documents and data extraction solutions. Without the need of costly infrastructure or hardwares, OCR services can process huge amounts of data efficiently. Cloud-based OCR services also allow users to access OCR features from anywhere using the internet. As more businesses are adopting cloud technology, VasyERP’s cloud-based OCR services can actively help organizations to align their workflows and enhance productivity.

3. Advancements in Natural Language Processing

The development of OCR technology is also being driven by advancements in Natural Language Processing (NLP). In comparison to OCR systems that just recognize individual characters, NLP algorithms are able to read and understand text. This makes it possible for OCR technology to identify important data, gather insights from documents and offer detailed information.

4. Mobile-Based OCR

With the increase in usage of smartphones and other mobile devices, customized OCR solutions are more in demand. Mobile OCR solutions allow users to directly scan and digitize text using their smartphones or tablets. Whether scanning handwritten notes, business cards, or receipts, mobile OCR solutions provide users the convenience to access and process data from anywhere.

Summing it Up

Optical character recognition is a latest feature that allows businesses to digitize documents, reduce manual entry, and save more time. Using AI-powered OCR features, organizations can extract important data from invoices, PDFs, receipts more precisely and accurately. It not only cuts down chances of human errors but also makes documents accessible and editable.

Simplify your business process with VasyERP’s smart OCR feature and better data management, enhanced productivity and smarter workflows.

Contact us now!

Frequently Asked Questions

1. What is OCR in invoice processing?

Optical character recognition is a technology that extracts data from captured invoices and converts it into digital format. Invoice OCR processing works by scanning only read-only documents such as PDFs and images, recognizing and extracting important information, and converting them into editable text format.

2. What’s the difference between Traditional OCR and AI-Based OCR?

Tradition OCR:

automatically extracts data depending on the particular set of rules it was developed on. As it depends on the predefined model, it is not good at identifying handwriting or any variants. In traditional OCR, it is also necessary to set up particular stages of setup while working with non-standard documents. This takes a lot of effort to define data fields and manually label the areas for every data point.

AI-Based OCR:

seamlessly extracts important details from any document. AI-powered OCR offers top-notch OCR that will not need any training to adapt to different documents. Apart from recognizing characters, AI-powered OCR reads context-rich content and smartly plans it to appropriate key pairs. OCR tools can save hours and reduce the chances of manual errors by scanning the documents automatically.

3. How does OCR help businesses? 

Optical character recognition allows businesses to automatically convert text from images and scanned files into searchable and editable formats, resulting in saving more time, reducing manual errors, and enhancing efficiency in multiple business operations including data entry, invoice processing, document management and customer service.

4. How can VasyERP’s OCR feature improve business operations?

VasyERP’s OCR feature improved business operations by automatically extracting data from invoices, receipts and other PDF documents which results in saving more time and reduces chances of human errors. OCR feature in POS software speeds up workflows, and ensures data accuracy. By integrating OCR features in your existing software, you can efficiently maintain records and help in data-driven decision-making boosting overall productivity.

5. What industries can benefit from VasyERP’s OCR technology?

Several industries can benefit from VasyERP’s OCR technology including manufacturing, FMCG, healthcare, legal, real-estate, retail, education, insurance, banking and finance, government, logistics, and tourism.