How to choose the best invoice data extraction software
Intelligent invoice processing promises finance departments a powerful way to boost productivity. But for CFOs, navigating the complex world of AI solutions to find the best fit is a major challenge, data shows.
According to Deloitte’s 4Q 2024 CFO Signals survey, the main risks for finance departments are a lack of agility and resilience, efficiency and productivity, and data compatibility and accessibility.
To address these challenges, almost half (46%) of CFOs say they plan to increase the deployment or investment in AI technologies.
But here’s a catch. Deloitte’s survey also reveals a big gap — 51% of CFOs identify technology and AI implementation as their biggest risk. This disconnect is particularly evident in critical functions, where many CFOs recognize the need for automation but struggle to find the right tools.
Choosing the right tools for your finance operations is paramount, especially in areas like accounts payable. To help you make an informed decision, we offer a close look at the top five invoice data extraction solutions. We’ll discuss their capabilities, pros and cons, and how they’re rated by users. After reading this post, you’ll find choosing the right invoice data extraction tool for your organization will feel more straightforward and less daunting.
What is invoice data extraction software?
Invoice data extraction software automatically scans paper and digital invoices to capture and process information. Automating this process eliminates manual data entry, improving productivity and accuracy.
Why do AP departments use invoice data extraction software?
The main reason AP teams use invoice data extraction is efficiency. Automation improves productivity by significantly increasing the number of invoices an AP clerk can process. It also reduces the chance of data entry and coding errors.
Cost savings
Greater employee productivity means lower staffing costs. It also frees employees from repetitive tasks. This lets them focus on higher-value tasks like finding process bottlenecks, reducing processing times, and securing vendor discounts.
Risk reduction and compliance
Most invoice data extraction solutions let you store and organize invoices electronically. This lets you control access to vital information, protect against data loss, and maintain a complete (and easily accessible) audit trail.
Scalability
The only way to scale manual invoice processing is to hire and train more people — which is costly and inefficient. Invoice data extraction platforms can easily handle larger invoice volumes without needing to add headcount.
Most invoice data extraction solutions typically combine three technologies: document digitization, optical character recognition (OCR), and intelligent document processing. Let’s look at how these technologies work (and work together) to automate invoice processing.
1. Document digitization
Document digitization solutions scan paper documents and convert them into digital formats like PDFs or TIFFs. As one of the earliest automation tools used in accounts payable, digitization software made it easier to manage and store invoices.
AP teams could scan invoices and store them electronically — although entering the invoice data into accounting systems was still a manual task. While newer technologies have now automated the data entry step, digital scanning and conversion remain a core component of most invoice data extraction solutions.
2. Optical character recognition
OCR converts scanned and digitized images into machine-readable text, which can be exported in formats like JSON, XML, or CSV for import into accounting systems. Some OCR solutions integrate directly with enterprise resource planning (ERP) and accounting software to automatically enter invoice data. Many accounting platforms and ERPs have built-in OCR functionality, allowing users to scan and enter invoices directly within the software.
While OCR goes a step beyond digitization by automating data extraction and entry, it often relies on pre-defined templates for specific invoice layouts. The software can struggle to read unstructured data or invoice formats that don’t match the templates.
Traditionally, this limitation required AP teams to develop new templates, enter invoice data manually, or rely on human reviewers to ensure the invoice data was accurate. To address this challenge, modern invoice processing solutions incorporate parsers or artificial intelligence (AI) tools that can interpret unstructured data.
3. Parsers and AI-powered document solutions
The next evolution of invoice processing software is intelligent document processing. These advanced tools go beyond basic template-based OCR to understand invoice structures and identify and extract key data points. They use AI and machine learning to continuously improve their accuracy and efficiency.
Backgrounder: How data parsing works
Data parsing is how intelligent document management systems interpret and capture data from complex documents. It’s the process of taking data (like the header and line item information on an invoice) and breaking it into usable parts.
Here’s a high-level overview of how it works.
1. Data extraction & tokenization
The process starts with a digital image (PDF, TIFF, etc.) of the invoice. The data extraction software uses OCR to convert the image to a machine-readable text file. After extracting the invoice data, the system breaks the text into “tokens” for processing.
2. Natural language processing
Next, the parsing engine analyzes the text and tries to identify and classify data points such as names, dates, prices, quantities, item descriptions, and addresses. Then it analyzes them to understand the structure of the text. Here’s where AI and machine learning come in.
Modern parsers are trained on large amounts of invoice data to recognize and understand many different invoice layouts and patterns. This training helps them know where to look for key data points. For example, the engine might recognize “Vendor name” as a label and then enter the adjacent text as the vendor name. It also helps the parser learn to use contextual information (like currency symbols, dates, etc.) to identify invoice data.
3. Data validation
The parser analyzes the data to make sure it’s accurate. For example, it might check to see if a date is in a valid format, or to verify that the total invoice amount matches the sum of the individual line item costs. Validation also corrects or removes inconsistencies like misspelled words and incorrect address information.
4. Data output
After validating the data, the parser organizes the information into a structured format (like JSON or XML) that can be imported into accounting software or ERPs.
Now that we know the mechanics of invoice data extraction let’s review the top solutions on the market today. We’ll start with the simplest solutions: AI-powered intelligent document management systems.
AI-powered intelligent document processing systems
Intelligent document processing systems use AI, machine learning, and parsing technologies to extract and process unstructured data.
These solutions can handle different invoice formats and extract invoice data with a high degree of accuracy. However, they typically focus on extracting data from documents and converting it into machine-readable files. AP teams must then manually upload these files into their accounting system. Some solutions offer ERP and accounting integrations to automate the upload process.
| AI document processing system | Target market | Pros | Cons |
| Docsumo | Small and medium businesses | Eliminates manual data entry, can interpret unstructured data | No accounts payable automation, AP teams must manually upload files |
| Rossum | Small and medium businesses | Handles many document formats and learns from human feedback | No accounts payable automation, AP teams must manually upload files |
| AvidXchange | Mid-market businesses with complex AP requirements | Many AP integration tools, specializes in payment processing | Relies on human indexers to verify and code data |
| Tipalti | Small, medium, and enterprise businesses | End-to-end procure-to-pay automation and self-serve vendor services | Relies on human reviewers to process invoices |
| Stampli | Mid-sized and enterprise businesses, non-profits, and governments | Proprietary AI employee automates invoice capture, coding, and routing | May not be ideal for small businesses with simple invoice workflows |
Docsumo
Docsumo is an intelligent document processing solution that automates data capture and extraction from various document types. It uses AI to help businesses convert unstructured data into structured, machine-readable data.
Features
- AI-powered parsing and data extraction: Can capture data from forms, structured, and unstructured documents.
- Analytics: Provides reports that let users measure data extraction efficiency and accuracy.
- Integration: Automatically shares extracted machine-readable data with ERPs, customer relationship management (CRMs), and accounting software.
Target market
Docsumo mostly serves small and medium businesses but also has enterprise solutions. (Source: G2)
Pros
Docsumo is a powerful data extraction tool that eliminates manual invoice data capture to improve efficiency. It leverages AI to improve scanning and capture accuracy and can interpret unstructured data.
Cons
Although Docsumo is a good invoice data extraction tool, it lacks built-in accounts payable functionality. To process the invoice data, AP teams must manually upload the data files to their accounting system or ERP or rely on one of Docsumo’s ERP integrations. This can add extra steps to the invoice processing workflow.
What Docsumo users say
We have a large number of Bank Statements that require analysis for lending purposes. Historically we have used a manual OCR tool to extract this information for input and analysis in our own lending models. Our previous tool was clunky to use and prone to error. The Docsumo process is quick, largely automated and has a very high level of accuracy. – G2 Reviewer
Rossum
Rossum is an intelligent document processing solution that combines AI-powered data extraction capabilities with a low-code platform. It leverages AI and machine learning to improve document scanning efficiency and accuracy.
Features
- Data extraction: Rossum uses a four-step process to receive and understand documents, resolve exceptions, and provide machine-readable data files.
- ISO and HIPAA compliance: Rossum is ISO 27001, SOC 2 Type II, and HIPAA compliant for data protection and regulatory compliance.
- Automatically trigger actions: After extracting document data, Rossum can automatically send an email, request an approval, or post the data to an ERP.
Target market
Primary focus on small and medium businesses but also serves enterprise customers. (Source: G2)
Pros
Rossum is designed to handle a wide range of document formats from multiple channels. It learns from human feedback to improve data extraction accuracy.
Cons
Like Docsumo, Rossum primarily focuses on data extraction and doesn’t provide end-to-end AP automation. Users must manually transfer invoice data to their ERP or use one of Rossum’s ERP integrations.
What Rossum users say
Rossum is helping in various use cases within our company. We use it for the improvement of our data quality, staying compliant on taxes by using invoices and automate our purchase orders of our B2B customers world wide. We benefit by reducing human error and having faster lead times. Without configuring a lot it can support a lot of document layout. No need to configure any rules or templates per layout / customer. – G2 reviewer
Accounts payable automation platforms
AP automation platforms streamline end-to-end invoice processing by combining intelligent invoice data extraction with built-in AP automation features. These comprehensive solutions eliminate the step of transferring invoice data to your accounting system or ERP.
AvidXchange
AvidXchange helps middle-market businesses manage AP workflows. Its services are built around payment processing, workflow automation, and invoice data capture.
- Invoice data capture: AvidXchange uses AI-powered OCR and machine learning to extract and validate invoice data, with human verification for exceptions and edge cases.
- AP automation: AvidXchange provides end-to-end automation of invoice capture, coding, verification, approval, and payment processing.
- Reporting: Real-time dashboards and reporting tools help users measure invoice processing performance.
Target market
AvidXchange primarily targets mid-market businesses with complex AP requirements. (Source: Capterra)
Pros
AvidXchange combines advanced invoice data extraction features with a full portfolio of AP tools. It specializes in providing payment processing services.
Cons
Although it features AI data capture, AvidXchange relies on human indexers to verify and code captured invoice data, introducing an extra step and possible source of errors.
What AvidXchange users say
It would be great if the indexers were a little more thorough and accurate. Our payables dept has to index many items and if this portion of the process worked as intended, we would have increased time savings. This issue has increased our department’s workload in some ways… AvidXchange has helped to solve the approval workflow inefficiencies. No more papers wandering around the office to be approved — invoices are scanned so everyone signs digitally. You can easily customize system-generated reminders and escalation days so items aren’t sitting around for long periods. – G2 Reviewer
Tipalti
Tipalti is a global payments provider that provides end-to-end AP automation. It offers AI-powered invoice capture and automated invoice and payment processing.
Features
- Invoice processing: Tipalti combines AI-based OCR with human-in-the-loop validation to ensure invoice data accuracy.
- AP automation: Tipalti automates the entire AP workflow, and provides flexible international vendor payment processing.
- Tax compliance: Tipalti helps customers maintain compliance with automated internal controls, audit trails, and security features.
Target market
Tipalti serves small, medium, and enterprise businesses. (Source: G2)
Pros
Tipalti offers end-to-end procure-to-pay automation, flexible payment processing, and self-serve vendor services to reduce manual tasks for AP teams.
Cons
Like AvidXchange, Tipalti doesn’t offer true AI-powered invoice data extraction. It relies on outsourced human reviewers to process invoices.
What Tipalti users say
Very easy to use! We needed to tweak our process using the software for our business needs, but I haven’t gotten anything but great feedback from the department head/approvers on the usability of the software… Though it [invoice capture] is great to have, 40% of the time the scan does not pick up the correct information from the invoice, thus the further development of that technology could be very helpful to ensure less work for the reviewer. This could possibly be improved by allowing the scan to detect more formats of invoices. – TrustRadius reviewer
Stampli
Stampli is a full procure-to-pay (P2P) platform centered on AP, extending to procurement, payments, credit cards, and vendor management. It leverages a proprietary AI model, Billy, your AI employee, that applies 83 million hours of AP expertise to extract, code, and process invoice data accurately.
Features
- AI-powered invoice data extraction: Stampli uses AI and machine learning to learn invoice types and cost accounting rules to extract, enter, and code invoice data accurately.
- AP automation: Stampli offers comprehensive P2P automation, including Cognitive AI™ for PO Matching, payment processing, and approval routing.
- Built-In ERP integrations: Stampli’s integrations support full native functionality for ERPs and accounting systems to facilitate smooth invoice data sharing.
Target market
Stampli serves mid-sized and enterprise businesses, non-profit organizations, and governments.
Pros
Stampli offers true AI-powered automation that provides seamless invoice data capture with minimal human oversight.
Cons
Stampli is more suitable for larger organizations with complex accounts payable needs and may not be the ideal solution for small businesses with simple invoice processing workflows.
What Stampli users say
Stampli specializes in its AI employee — Billy . After the initial AP invoice scan, Billy will auto fill in the invoice data! Not only does it auto fill in generic invoicing data like amount and bill date, but it will also generate the vendor name, subsidiary, approvers, and even a GL account — directly from your ERP Data. Although the system is not perfect, it is a great feature to streamline AP processing. – G2 Reviewer
Other invoice data extraction solutions to consider
Beyond point solutions and AP automation platforms, several other options are available for automating invoice data extraction.
ERPs with integrated invoice processing automation
ERPs like SAP, NetSuite, Intacct, and MS Dynamics often include automated invoice processing in their accounts payable modules, offering seamless invoice data sharing with core financials. However, these integrated solutions may lack the advanced AI features of dedicated invoice automation tools. This makes them best-suited for organizations with existing ERPs and basic invoice processing needs.
Accounting software with basic invoice capture features
Small and medium organizations with simpler needs can use the invoice processing features included in accounting packages like QuickBooks Online or Xero. These solutions often lack advanced automation features like invoice data verification, coding, and approval routing, so they may not be suitable for larger organizations.
Open-source invoice processing
Technically savvy organizations may leverage open-source OCR and document capture engines like Tesseract to build custom invoice processing solutions. This can require significant development work and may only be useful for companies with unique or highly specific invoice processing needs that require custom workflows.
How to select the best invoice data extraction solution
The right invoice data extraction software can make your AP processes faster and more accurate. Finding the best solution can be tricky, given the challenges CFOs expect with AI implementation. The ideal solution should meet these requirements:
- Human intervention when appropriate: Look for solutions that ask for human intervention at key decision points, such as confirming a price or quantity. Be skeptical of solutions that promise AI automation but rely on outsourced invoice processing.
- AI as a helper rather than a replacer: AI tools should work alongside human employees to help them do their jobs better. Look for human-centric solutions that promise productivity gains instead of just headcount reduction.
- Scalability to support business growth: Not all solutions scale the same way. Consider solutions that scale your entire AP workflow, not just bits and pieces.
- Responsive and knowledgeable customer service: Prioritize solutions that provide responsive customer service from AP experts to ensure your finance team is fully supported.
If your ideal invoice data extraction solution checks all these boxes, Stampli may be the perfect fit. Contact one of our AP experts to learn more!
