How to add document OCR to Dynamics 365 Finance and Supply Chain
Short answer
Run scans and PDFs through an OCR and extraction layer, match the output to POs, vendors and items, and post into pending records using data entities or DMF. Use confidence scores to decide what posts automatically and what a clerk reviews, and attach the source file to the record.
Manufacturers on Dynamics 365 Finance and Supply Chain still receive paper-shaped information: vendor invoices, packing slips, certificates of conformance, mill test reports, customs paperwork and inspection sheets. The ERP is good at structured entry and poor at reading these, so clerks key values and attach a PDF as an afterthought.
Microsoft offers pieces: document handling for attachments, Electronic reporting for structured formats such as electronic invoices, and, depending on your licensing and release, Power Platform based invoice capture built on AI Builder. These cover common invoice cases but not certificates, packing slips with partner-specific layouts or drawings, which is where a broader OCR pipeline earns its keep.
This page covers choosing documents worth automating, mapping extracted fields to ERP structures, and designing the review step so accuracy is a measured number, not a hope.
What teams use it for
Vendor invoices to pending invoices
Extract header and line fields, match to PO and product receipt, and create a pending vendor invoice with three-way match tolerances evaluated by the system.
Packing slip receiving
Read supplier packing slips to prefill product receipts against open PO lines or warehouse receiving work, flagging quantity differences before putaway.
Certificates of conformance and mill certs
Capture heat or lot numbers, specifications and test values and attach them to the receiving record or batch, with tracking dimensions populated where configured.
Inspection and test sheets
Digitise handwritten or PDF inspection sheets into quality order test results for items without direct instrument integration.
Customs and shipping documents
Pull commodity codes, origin and values from commercial invoices to cross-check against the item data used for intrastat or export reporting.
Customer drawings and specs
Extract revision, part number and notes from incoming drawings to compare with the released product and engineering change records.
Microsoft Dynamics 365 Finance and Supply Chain integration surface
- Document handling: attach files to nearly any record (document types, Azure Blob backed storage), with the original always retrievable from the form.
- Data entities for vendor invoice headers and lines, product receipts, quality order results, and tracking dimensions; use OData or the DMF recurring integrations API for volume.
- Vendor invoice workflow: pending vendor invoices, invoice registration and approval workflows, with matching policy and price/quantity tolerances configured in the accounts payable parameters.
- Electronic reporting (ER) configurations can import structured electronic invoice formats (UBL-style or country specific) without OCR, which should be preferred when partners can send them.
- Power Platform and AI Builder based capture solutions may be available for invoices in your environment; confirm what your licence and release include before building your own.
- Product receipt and warehouse mobile flows can consume the OCR result as a prefill but should still require a scan or confirmation at the dock.
How it works
- 1
Inventory the documents
Sample 100 to 200 real documents per type, note layouts and languages, and decide which are worth automating by volume and error cost.
- 2
Choose the extraction approach
Layout-aware OCR plus a model for fields. Off-the-shelf invoice models handle standards; templates or fine-tuning help for fixed partner formats and certificates.
- 3
Define the target schema
Map each extracted field to an ERP field, including units, currency, tax codes and tracking dimensions, and decide which are mandatory.
- 4
Match to ERP data
Resolve vendor, PO number, product receipt and item, using vendor product numbers and fuzzy matching, with per-field confidence.
- 5
Set thresholds
Auto-create only when all mandatory fields meet a high confidence and the match passes tolerance checks; anything else goes to review.
- 6
Write and attach
Create the pending record via entity or DMF, attach the original, and store the extraction JSON for audit.
- 7
Review and learn
Show the image beside the extracted fields, log corrections, measure straight-through and error rates per partner and retrain or adjust rules monthly.
Example flows
Invoice with a PO reference
Trigger: A vendor PDF invoice arrives in the AP intake mailbox.
- OCR extracts invoice number, date, totals, PO reference and lines.
- The pipeline finds the PO and received quantities.
- Line quantities and prices are compared with tolerances.
- All fields clear the threshold, so a pending vendor invoice is created with the PDF attached.
- The standard approval workflow takes over.
Result: AP handles only invoices that fail matching or confidence, and the ERP still does its normal three-way match.
Certificate of conformance at receiving
Trigger: A receiver scans a CoC that came with a metal bar shipment.
- Extraction reads material grade, heat number and specification.
- The pipeline compares them to the item's required specification.
- A mismatch flags the receipt for quality review before putaway.
- Matching certificates are attached to the receipt and the heat is recorded in the batch or tracking field.
Result: Traceability data is captured at the dock and missing or wrong certificates are caught before parts are consumed.
Keeping data on-prem
Documents like certificates, drawings and customer POs can be controlled technical data, so many sites will not send them to a cloud OCR service. Run OCR and the extraction models locally on GPU or CPU servers, keep the review UI on your network and write into the ERP through its endpoints or a DMF file drop. In Local Business Data deployments, authenticate with AD FS and consider storing attachments in the on-premises document store rather than the cloud default. Model updates are then a controlled change process on your side.
Security checklist
- Store originals in the ERP document store or a controlled archive with the same retention rules as the transaction.
- Restrict who can see attachments by document type and role.
- Log extraction output, confidence and the human corrections for audit.
- Block creation of new vendors or banking details from OCR output; route to master data governance.
- Scan uploaded files for malware before processing.
Ways to get it done
Native or Microsoft ecosystem invoice capture
Effort: Configuration measured in weeks, subject to licensing.
Standard invoices when the included capability covers your formats and languages.
Third-party capture product with a Dynamics 365 connector
Effort: Weeks, with per-document pricing.
High invoice volume and mature AP teams.
Partner build with Netray
Effort: Scoped after sampling your documents and measuring baseline accuracy.
Certificates, packing slips, drawings and on-prem requirements, or invoices with unusual layouts.
Pitfalls
- !Totals can be right while line items are wrong; validate that lines sum to the total.
- !Decimal and date formats vary by supplier country; normalise per vendor locale.
- !Auto-posting skips the human catch for duplicate invoices; check invoice number plus vendor plus amount.
- !Handwriting and stamps on inspection sheets lower confidence sharply; plan review for them.
- !Without tolerance rules aligned to the ERP matching policy, you automate disagreements instead of reducing them.
Frequently asked questions
Does Dynamics 365 Finance and Supply Chain include OCR?
Document handling stores files but does not read them. Depending on release and licensing, a Power Platform based invoice capture solution may be available. Confirm before building your own.
How accurate is OCR on supplier invoices?
It varies with layout quality and consistency. Clean digital PDFs from repeat vendors can run mostly straight through, while scans and handwriting need more review. Measure per vendor on your own samples.
Can OCR fill in quality results from inspection sheets?
It can propose values for quality order test results, but a quality person should confirm, especially for regulated parts where the signed sheet is the record.
Do we need to keep the original document?
Yes. Attach it to the record using document handling or your archive. Auditors and disputes will refer to it, not to the extracted data.
Can this work offline from the cloud?
Yes. Local OCR and open-weight extraction models run on your servers, and only the ERP write path is needed. This suits controlled technical data and air-gapped sites.
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