Your Questions About Data Extraction Tools in AP Automation, Answered

You might know this statistic already: On average, it takes an accounts payable (AP) employee around 12 minutes to process a single, manual invoice. It’s a number AP departments have had to work with for years, with minimal variance possible.

While still considered an acceptable processing rate for manual work, the advent of data extraction tools found in AP automation software is helping raise that capacity to around 30 invoices per hour.

But what do data extraction tools do?

By automating the collection and interpretation of data from invoices and payment documents, data extraction tools are helping streamline processes, reduce manual labor, and minimize the risk of errors in all types of AP applications.

Data extraction technology first emerged in the 1980s, when businesses began leveraging it to streamline operations. However, only within the last decade have AP departments begun adopting these tools and integrating them into daily operations—partly because advancements in artificial intelligence (AI) and machine learning (ML) have made data extraction more accurate and affordable.

Today, these tools have become essential to modern AP automation because they enable businesses to manage large volumes of transactions with greater speed, fewer errors, and more efficiency. In fact, a 2024 report by PYMNTS noted that 78% of CFOs view AI as crucial for accounts payable.

In this article, we will address key questions about data extraction tools and explore what they are, how they work, and why they have become indispensable in AP automation.

What is data extraction?

Data extraction is the automated process of retrieving structured information from unstructured or semi-structured documents. In the context of AP operations, it typically involves identifying, capturing, and processing important details—such as invoice numbers, payment amounts, vendor names, dates, and line-item specifics—from documents like invoices and purchase orders. Once extracted, this data is standardized and entered into AP systems, enabling automated workflows and real-time visibility into financial data.

By relying on a combination of technologies, data extraction tools interpret information from various document types such as scanned images, PDFs, emails, and other formats. This automation eliminates the need to manually enter data and subsequently reduces errors, allowing AP teams to shift their focus toward strategic financial tasks like data analysis and vendor management.

What technology tools do businesses use in data extraction?

The technology behind data extraction has advanced significantly, providing today’s AP teams with a number of sophisticated tools that help scale operations. When combined, these technologies improve data extraction to make AP automation more reliable and easier to scale.

Optical Character Recognition (OCR) is a foundational component of data extraction as well as one of the oldest tools available in this technology space. It allows systems to recognize and digitize printed or handwritten text within scanned images or PDFs, and over time, OCR has evolved to handle varying fonts, document layouts, and even low-resolution images—making it an essential part of AP automation. 

Further enhancing data extraction by enabling systems to learn from patterns and past interactions, Machine Learning (ML) helps AP systems refine data interpretation over time since it’s able to decipher patterns of invoices and other documents and match their details with vendors.

Natural Language Processing (NLP) also plays a crucial role in interpreting the context of text within documents, such as line-item descriptions or product details. The technology is particularly valuable when extracting data from documents that contain unstructured content or multiple languages.

One more technology of significant importance is Robotic Process Automation (RPA). By automating repetitive tasks such as matching invoices to purchase orders or routing documents for approval, RPA can reduce the need to search and match documents. 

How does data extraction work in AP automation?

Data extraction in AP automation captures information from incoming invoices and routes it to the appropriate systems for processing. The process typically begins with document intake, where an invoice—whether it arrives via email, a scanning system, or an AP portal—is automatically entered into the data extraction workflow. 

OCR and NLP technologies then interpret the document, identifying and capturing fields such as vendor names, invoice numbers, line items, amounts, and due dates. Taking things a step further, ML models can classify and organize this data, therefore improving accuracy through pattern recognition. 

Following extraction, the data undergoes validation, where it is cross-checked against other records like purchase orders or receipts, to ensure accuracy. RPA tools handle this validation step, flagging discrepancies for human review and reducing processing errors. Once validated, the data flows directly into a business’s AP or ERP system, where it is stored, routed for approval, and scheduled for payment.

Are data extraction tools and AP automation software actually the same thing?

No, data extraction tools and AP automation software are not the same thing, although they are complementary and are often used together in streamlining AP processes.

Data extraction tools are designed specifically to pull relevant data from various document types, especially invoices, receipts, and purchase orders. These tools use technologies like OCR, ML, and sometimes NLP to capture critical data from these documents. For example, they can extract details like vendor names, invoice numbers, dates, line items, and amounts. This is just the first step in an automated workflow—ensuring that AP teams have accurate, digitized data ready for the next stages.

Comparatively, AP automation software encompasses a broader set of functionalities that streamline the entire AP process, from start to finish. AP automation solutions may include invoice capture (which often leverages data extraction tools), approval workflows, exception handling, matching against purchase orders, and even integration with payment processing systems. In essence, AP automation software orchestrates the entire lifecycle of invoice processing and payment in order to reduce manual touchpoints and minimize the risk of errors.

So, while data extraction tools are critical components within the AP automation ecosystem, the two are distinctly different. Data extraction tools provide the “raw” data, whereas AP automation software manages that data through a complete workflow, leading to improved AP processes. 

What are the benefits of using data extraction tools in accounts payable?

Data extraction tools provide several notable benefits to AP departments. For one, they increase efficiency by speeding up the time it takes to process invoices, and this scalability is especially valuable for businesses with high transaction volumes. Data extraction tools also enhance accuracy by minimizing the human errors associated with manual data entry, leading to fewer payment errors and reducing the risk of duplicate payments or missed deadlines. 

In terms of cost savings, automated data extraction tools reduce processing expenses by cutting down on manual tasks AP employees traditionally must do. Additionally, they support compliance and auditability by helping AP teams maintain accurate and comprehensive records. With these tools, it’s much easier to meet regulatory requirements and prepare for audits. 

Data extraction tools also contribute to improved vendor relationships, as quicker processing times enable AP teams to pay vendors more consistently and on time, therefore strengthening business relationships and enhancing a business’s reputation.

What are the steps to onboarding an AP automation solution in accounts payable?

1. Assess Needs and Set Goals.
   Begin by identifying your AP department’s current pain points and defining what success looks like with an AP automation solution. Outline clear objectives, such as reducing processing time, improving accuracy, or achieving specific cost savings.
2. Choose the Right Solution.
   Research AP automation providers and compare their features to ensure alignment with your business needs. Look for features like data extraction, approval workflows, integrations, and reporting capabilities.
3. Plan the Implementation Timeline.
   Collaborate with the vendor to create a realistic implementation plan, including timelines for setup, configuration, training, and testing. It’s essential to factor in your team’s availability and readiness for each stage.
4. Configure and Customize.
   Work closely with your chosen provider to tailor the solution to your unique AP processes. This includes setting up approval hierarchies, custom data fields, invoice-matching rules, and user permissions.
5. Integrate with Existing Systems.
   Ensure smooth integration between the AP automation software and your existing ERP or accounting system. Proper integration allows data to flow seamlessly, reducing manual input and improving accuracy.
6. Conduct Training and Testing.
   Provide thorough training for your AP staff and stakeholders to ensure everyone is comfortable using the new system. Run test scenarios to identify and resolve any issues before full rollout.
7. Go Live and Monitor Performance.
   Launch the solution and closely monitor its performance. Track KPIs such as processing time and error rates to measure success and make adjustments as needed.

Following these steps can help ensure your business experiences a smooth transition to a fully automated AP process, boosting efficiency and accuracy. 

Who should utilize data extraction tools in their AP operations and why?

Invoice extraction tools are beneficial for all organizations, but they offer significant value to certain industries. Businesses with high-volume AP departments, such as those in retail, manufacturing, and healthcare, can achieve substantial efficiency gains and cost savings by using the technology available through these tools. 

Remote workforces and decentralized AP teams also benefit significantly, as data extraction tools help ensure data is processed accurately and consistently across locations, supporting a unified AP process.

Any businesses in highly regulated industries will benefit from enhanced compliance, as data extraction tools support regulatory requirements by creating comprehensive documentation trails and improving audit readiness.

Ready to add data extraction tools to your digital transformation strategy?

Combined with AP automation solutions, data extraction tools are transforming AP departments and by using a combination of OCR, ML, NLP, and RPA, data extraction technologies streamline AP workflows and allow teams to focus on high-priority initiatives. 

To discover how data extraction and automation can elevate your AP processes, contact CloudX for specialized invoice and payment automation solutions tailored to meet your AP needs.