accounting technology accounting trends

Will ICR Overtake OCR Technology as the Future of Accounting?

July 13th, 2018

ICR technology

Sorting through piles of forms, collating all the information on them and organising them in logical sequences can be extremely time consuming. Computers have been able to take much of the workload off our shoulders, but their capabilities with converting written language into a digital format is still relatively limited. An accountant can save soft copies of forms on a computer by scanning them, but the computer will not be able to interpret the information on each form. In other words, a computer can save forms as images, but won’t be able to store and use them as text. Computers and humans speak two different languages. Optical Character Recognition (OCR) is a technology that tries to bridge this gap so computers can process text more easily.

How Does OCR Technology Work?

Optical Character Recognition is just another term for something we do countless times throughout the day. As you read this article, your eyes and brain are working together to recognise each letter and interpret them meaningfully, which is essentially a form of OCR. But imagine if you were looking at a chunk of text in a language you don’t understand, like Mandarin. While you would be able to see each character, your brain wouldn’t be able to make any sense of it. This is the exact same hurdle computers encounter when faced with text. Optical Character Recognition is a type of technology that interprets text in a language that computers can understand. The technology is able to understand only a special type of font, known as OCR-A. Cheque numbers, for example, printed at the bottom of each cheque were one of the first to use OCR-A to enable banks to process them much faster.

Being able to translate text in a digital format is incredibly important to accounting firms as they deal with large volumes of forms and documents. Transferring information manually onto a computer database takes up too much time and manpower. While OCR has been able to rectify much of this problem, the technology is far from comprehensive.

Limitations of OCR Technology

If everything was typed in OCR-A font, there would be no limitations for how OCR technology could be used. But in the real world, of course, there are a number of different fonts people use. The issue becomes more complicated when you take into account handwritten characters. Each person has their unique stylised way of writing characters, a style that cannot possibly be standardised. OCR technology is more or less powerless as far as other fonts and writing styles are concerned because it can’t interpret them accurately.

Application of OCR technology is also limited because it can only recognise characters if they are typed in their designated placeholders. If a name is typed in a box that the technology is programmed to recognise as a field for the name, OCR will interpret it as the name. However, if details are filled in a template that’s different from a standardised one, OCR will not be able to look for the information required and process it. This is a significant obstacle as not all forms follow a standardised format.

The Emergence of ICR Technology

Intelligent Character Recognition (ICR) is an extension of OCR technology that is aimed at reducing the issues inherent in the latter. Also known as feature detection, ICR technology can interpret text beyond just the OCR-A font. Instead of detecting identical characters, ICR recognises their general pattern which enables it to interpret the text. For example, each one of us might write the letter H in different ways. However, no matter what style we use to write it, H will always have two vertical lines with one horizontal line in the middle. ICR technology recognises this pattern and will interpret the character as an H even if it is handwritten. While it is still not highly accurate at interpreting cursive handwriting, the technology is being improved and will soon be able to recognise this as well. In an accounting practice which deals with large volumes of printed and handwritten documents, ICR technology could soon drastically slash the time taken to process each one of them.

But the advantages of ICR go even further. Unlike OCR which recognises text only in specific fields, ICR technology is a lot more flexible. It can scan a document, interpret the text on it and sort the information in required categories. This feature is an important reason why many airports these days are adopting ICR. The format of passports varies between different countries, which is why traditional OCR technology will not be effective in scanning them. ICR technology, on the other hand, has the capability to not only record the information on different passports but also group them under relevant categories such as ‘Name’ ‘Address’ and ‘Age’.

Applications of ICR Technology in Accounting Practices

A firm using only OCR technology will be severely hampered from automating their processes. From documents to forms to applications, an accounting firm deals with a large number of paper-based data, both handwritten and typed. The introduction of ICR technology will, to a large extent, automate data entry, verifications and scanning. With the digitalisation of data, managing and tracking large volumes of it also becomes faster and easier.

However, ICR software might not be the best option for all accounting firms. This technology does come at a higher expense and includes additional costs to set up, configure and maintain. Smaller firms might not be able to offset these expenses through their total revenue generated. Larger firms, on the other hand, will be able to benefit hugely from ICR technology. Firms that process a minimum of hundred forms each month, for which they require over 100 man hours will be able to reduce time and manpower by adopting ICR technology. Firms with an in-house IT department might also be able to avoid paying additional setup and configuration costs by having their own staff take care of it.

The advancement of ICR technology will be a game changer for accounting firms looking to automate their processes or venture into business process outsourcing. Would this technology help you save time and aid the growth of your firm? Let us know in the comments section!

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