Automating Purchase Order Processing with OCR

Processing purchase orders (AKA sales orders) is a common business process for many businesses providing products in the B2B space. While there has been a growth in EDI (Electronic Data Interchange) over the years, allowing the computer systems of the buyer and seller to exchange data directly, the reality is that the technology is expensive and only worthwhile for sellers and buyers who constantly transact large volumes of orders between each other.

 

For low-volume buyers, the submission of a standard purchase order document, often by email with a PDF attachment, has become the industry standard method of ordering, but requires manual entry of order information by the seller into their order management system. In lieu of a manual process, OCR and data extraction technology, which automates purchase order extraction, can strengthen and future-proof a business’s ability to fulfil purchase orders in a timely manner.

 

Let’s explore the common challenges faced by finance and procurement teams when handling orders, the operational implications of purchase order errors, and how Xtracta’s AI-powered OCR offers a faster, more accurate alternative to capturing purchase order data.

 

Common Issues and Limitations of Manual Purchase Order Processing

A typical manual process for organising and fulfilling purchase orders will involve employees scanning a document, transcribing the key details into a spreadsheet or order screen, and passing it on for fulfilment, whether it’s warehouse staff in the case of goods or other departments for service-based companies. Scattered across this process are several opportunities for errors and general issues to disrupt this workflow, the biggest of which include:

 

Transcription Errors

When a purchase order comes through, the person handling it needs to extract key details such as the delivery address and products. The most important of these are the items themselves, which are represented by product codes, usually with a combination of letters and numbers, if not purely the latter. Because an employee is manually transcribing the document, they may type in the wrong item code due to a typo or misreading the purchase order.

 

Inconsistent Product Codes

Sometimes, a customer will produce a purchase order for what they believe is the item they’re after. If the product code they’re relying on is wrong or out-of-date, they may not receive what they actually wanted. Even if staff at the seller detect the issue, rather than interrupting their work, they may just assume a substitute product on behalf of the buyer and key this against the order.

 

Volume Surges

It can be common for there to be surges in purchase orders received by companies from their buyers. From busy times of the year, such as the holiday season and major sales periods, through to promotions and runaway product sensations and crazes, the number of orders received can increase substantially in a very short period of time. Maintaining speed and accuracy is a challenge that many businesses face when handling increased purchase order demand. Automated technology can scale horizontally, allowing no degradation in order intake speed, no matter the surge.

 

Difficult to Scale

Manual purchase order processing is time-consuming. Some purchase orders are extensive, with a wide range of different items, all in different amounts, taking up tens of minutes (or in some cases hours) at a time. Even shorter purchase orders with one or two items can still take up time when there are dozens or hundreds to get through. When business is seasonal, the issue becomes exacerbated by needing to meet demand with only so many levers available. Hiring temp staff can result in diminishing accuracy of results, and employing extra staff isn’t practical when sales only peak at certain times of year.

 

The risks of poor purchase order processing

Speed and Urgency

Manual purchase order processing can only happen as fast as the user is able to process them. The two main ways of speeding up this process are therefore hiring more people and training people to be faster. Even at peak efficiency, the process may not match the tempo of the business and the urgency with which customers need the order. And on days or periods where an employee is sick or away, this process slows down even further.

 

For example, an electrician may receive a callout for an emergency job. After assessing what they need to address the issue, they will put in an order for any extra parts they need from the local electrical merchant. They can raise the purchase order through their job management software onsite and then straight away be on the way to pick up that order from the merchant. If the merchant is slow, by the time the purchase order has been manually input into their system and gone to pick the parts, the electrician may already have arrived and be waiting to collect the parts. With other merchants on the same street, if the electrician becomes frustrated by delays, they may take their business elsewhere.

Consequences of Purchase Order Errors

Whether it’s an order turning up at the wrong address or the wrong item being delivered, purchase order issues put stress on client relationships. In an increasingly competitive business world, managing good relations with your customers is critical. Regardless of where the error came from, when normal procedures are disrupted, it can be costly and stressful, making it more likely for your client to take their business elsewhere.

 

In the instance of the wrong item being sent, the customer now has to deal with the additional burden of re-ordering what they want and returning the unwanted goods. This also creates accounting issues where a customer gets invoiced for something they didn’t order and don’t want. When this happens for larger orders, customers may end up with trucks of unwanted goods, which also creates unnecessary costs for your business.

 

With an automated purchase order process that utilises modern OCR, these errors and limitations can be avoided.

 

Purchase Order OCR’s Key Advantages with Xtracta

Modern AI OCR automates the purchase order process. When fed a PDF or any other type of document, the purchase order is contained in, Xtracta reads and extracts the relevant information, speeding up the workflow dramatically. Not just regular OCR, Xtracta’s machine learning foundations can analyse new formats without needing a new template each time, one of many key differences between generic OCR software and specialised AI data extraction tools.

 

Superior Accuracy

When an employee is tasked with processing purchase orders, their accuracy is likely to worsen as the day goes on. Even the most experienced staff have a finite mental capacity for menial tasks such as purchase order processing. Xtracta is trained to accurately identify purchase order contents and output the correct information needed. Xtracta can use uploaded databases, real-time web service/APIs and even direct database connections to validate product codes, check stock levels, find the correct product code, and more.

 

Instant Scaling

When demand surges and extra purchase orders come through, Xtracta can keep up with practically no extra overhead. The more purchase orders it receives, the more it will process. The same volume in the hands of a manual process would take extra days or even weeks compared to extra minutes from Xtracta.

 

<h3>Automated Exception Handling</h3>
Xtracta can be configured to provide significant levels of validation and data enrichment to the orders it receives for processing. From being able to automatically reply back to purchasers in situations where products are not in stock to providing information on substitutes for discontinued parts, issues with orders can be pre-emptively dealt with and communicated to buyers without taking up valuable staff time.

 

Unlock New Efficiencies with Automated Purchase Order Management

Manual purchase order workflows introduce risks that compound over time. From slower turnaround to higher error rates that risk straining client relationships, a process that relies solely on people has limitations that purchase order OCR can bypass.

 

With a tool such as Xtracta, organisations can eliminate repetitive transcription tasks and minimise product code inconsistencies. And with the capacity to scale instantly when demand peaks, businesses can act with resilience. For teams looking to modernise their workflows, get in touch with an Xtracta expert today for ways to streamline the purchase order process.