AI for Finance & Accounting

Module 4: Data Extraction from Documents

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Module Overview

Finance professionals spend countless hours extracting data from invoices, contracts, statements, and other documents. AI can dramatically streamline this process. In this module, you'll learn to leverage AI for efficient, accurate data extraction.

Learning Objectives:

By the end of this module, you will be able to:

• Extract data from invoices and receipts effectively
• Process contract information with AI assistance
• Handle financial statements and reports extraction
• Build reliable extraction workflows
• Verify and validate extracted data

Estimated Time: 1.5-2 hours

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4.1 Understanding Document Extraction

The Data Extraction Challenge

Finance teams frequently need to extract data from:

• Invoices and purchase orders
• Receipts and expense documents
• Contracts and agreements
• Bank and investment statements
• Tax documents
• Financial reports and filings

Traditional Approaches:

• Manual data entry (slow, error-prone)
• OCR software (limited understanding)
• Template-based extraction (brittle)

AI Advantage: AI understands document context and can extract meaning, not just characters. It adapts to different formats and can identify relevant information even when layouts vary.

How AI Extraction Works

Modern AI can:

1. Read documents: Process text from various formats
2. Understand structure: Recognize headers, tables, sections
3. Identify fields: Find specific data points
4. Extract values: Pull out the relevant information
5. Handle variations: Work across different document formats

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4.2 Invoice and Receipt Processing

Basic Invoice Extraction

Template Prompt:

Extract the following information from this invoice:

[Paste invoice text or describe invoice image]

Please provide in structured format:
- Vendor name
- Vendor address
- Invoice number
- Invoice date
- Due date
- Line items (description, quantity, unit price, total)
- Subtotal
- Tax amount
- Total amount
- Payment terms

Handling Multiple Invoices

Batch Processing Template:

I have multiple invoices to process. For each one, extract:

Required fields:
- Vendor name
- Invoice number
- Date
- Total amount
- Due date

Format the output as a table suitable for import into Excel.

Invoice 1:
[Paste content]

Invoice 2:
[Paste content]

[Continue as needed]

Expense Receipt Processing

Process this expense receipt for reimbursement:

[Receipt information]

Extract:
- Vendor/merchant name
- Date of purchase
- Total amount
- Payment method (if shown)
- Category (meals, travel, supplies, etc.)
- Tax amount (if itemized)

Flag if any information is unclear or missing.

Handling Variations

Different vendors format invoices differently. AI can adapt:

Extract invoice data from these three different vendor formats.
Normalize the output into a consistent structure:

Vendor A format:
[Paste]

Vendor B format:
[Paste]

Vendor C format:
[Paste]

Standard output for each:
- Vendor, Invoice#, Date, Due Date, Total, Currency

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4.3 Contract Data Extraction

Key Contract Terms

Template for Contract Review:

Extract key terms from this contract:

[Paste contract text or relevant sections]

Please identify:
1. Parties involved
2. Effective date and term
3. Financial terms (amounts, payment schedule, pricing)
4. Key obligations of each party
5. Termination provisions
6. Renewal terms
7. Important dates/deadlines
8. Notable conditions or contingencies

Lease Agreement Extraction

Extract financial terms from this lease agreement:

[Paste lease content]

Focus on:
- Lease term (start/end dates)
- Monthly/annual rent
- Rent escalation provisions
- Security deposit
- Operating expense provisions (CAM, taxes, insurance)
- Renewal options and terms
- Tenant improvement allowances
- Early termination provisions
- Key dates for notices

Service Agreement Terms

Review this service agreement and extract:

[Paste agreement]

Key information needed:
- Service provider and client
- Scope of services
- Fee structure (fixed, hourly, retainer)
- Payment terms
- Contract duration
- SLA terms (if any)
- Liability limitations
- Termination for convenience rights
- Auto-renewal provisions

Creating Contract Summary Tables

Create a summary table of key terms from these contracts
for our contract management database:

[Paste multiple contracts or excerpts]

Table columns needed:
- Counterparty
- Contract type
- Effective date
- Expiration date
- Annual value
- Payment frequency
- Auto-renewal (Y/N)
- Notice period for termination
- Key renewal date

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4.4 Financial Statement Extraction

Extracting from Annual Reports

Extract key financial metrics from this 10-K excerpt:

[Paste relevant sections]

Metrics to find:
- Revenue (current year and prior year)
- Net income
- Total assets
- Total liabilities
- Shareholders' equity
- Cash from operations
- Capital expenditures
- Any segment breakdowns

Present in a clear table with year-over-year comparison.

Bank Statement Processing

Process this bank statement and extract:

[Statement information]

Output needed:
1. Summary: Opening balance, deposits, withdrawals, ending balance
2. Transaction list: Date, description, amount, running balance
3. Categorization suggestions for each transaction
4. Any fees identified
5. Any returned items or exceptions

Investment Statement Data

Extract from this investment statement:

[Statement content]

Information needed:
- Account holder and account number
- Statement period
- Beginning and ending portfolio value
- Deposits/withdrawals during period
- Holdings list (security, shares, price, value)
- Dividends/interest received
- Realized gains/losses
- Unrealized gains/losses

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4.5 Tax Document Processing

W-2 and 1099 Extraction

Extract data from this tax document:

[Document content]

For W-2:
- Employer name and EIN
- Employee name and SSN (last 4 only)
- Wages in boxes 1, 3, 5
- Federal, state, local withholding
- Other box amounts

For 1099:
- Payer name and TIN
- Recipient name
- Type of income and amount
- Any withholding

Note: Handle SSN/TIN data carefully per your firm's policies.

K-1 Information

Extract partner K-1 information:

[K-1 content]

Key fields:
- Partnership name and EIN
- Partner name and ownership %
- Ordinary income/loss
- Interest income
- Dividend income
- Capital gains/losses
- Section 179 deduction
- Self-employment earnings
- Partner's capital account changes
- Any AMT adjustments

Organizing Tax Documents

I have multiple tax documents for a client. Help me
organize them by creating a summary:

[Paste or describe documents]

Create a table showing:
- Document type
- Payer/Source
- Gross amount
- Withholding
- Category for tax return
- Any notes/flags

Identify any common issues or missing documents I should
request.

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4.6 Building Extraction Workflows

Structured Extraction Process

1. Prepare the document

   • Ensure text is readable
   • Identify the document type
   • Note any special considerations

2. Run initial extraction

   • Use appropriate prompt template
   • Request structured output
   • Include all needed fields

3. Verify the output

   • Check extracted data against source
   • Validate calculations add up
   • Flag any uncertain items

4. Handle exceptions

   • Note items needing clarification
   • Document assumptions made
   • Queue for human review if needed

Quality Validation Template

Review this extracted data for accuracy:

Original source:
[Paste source text]

Extracted data:
[Paste your extracted data]

Please:
1. Verify each field matches the source
2. Identify any discrepancies
3. Flag uncertain extractions
4. Check that totals reconcile
5. Note any missing information

Creating Standard Output Formats

Design your extraction outputs to match your systems:

Extract invoice data in this exact format for our
accounting system import:

Required fields:
- vendor_id (or vendor_name if new)
- invoice_number
- invoice_date (YYYY-MM-DD format)
- due_date (YYYY-MM-DD format)
- line_items (array of: description, quantity, unit_price, gl_code)
- tax_amount
- total_amount
- currency (ISO code)

[Paste invoice]

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4.7 Best Practices and Limitations

Best Practices

1. Always Verify

• AI extraction is not perfect
• Spot-check against source documents
• Implement validation rules

2. Use Structured Prompts

• Specify exact fields needed
• Request consistent formats
• Define how to handle missing data

3. Handle Sensitive Data Carefully

• Be mindful of what you share with AI
• Consider data privacy implications
• Use enterprise AI tools for client data

4. Build Templates

• Create prompts for recurring document types
• Standardize output formats
• Document your extraction processes

Limitations to Recognize

AI Extraction Struggles With:

• Handwritten documents
• Very poor quality scans
• Highly unusual formats
• Documents requiring domain expertise to interpret
• Information not actually present in the document

When to Use Human Review:

• High-value or high-risk documents
• Complex or ambiguous terms
• Any extraction you'll rely on significantly
• Regulatory or legal requirements

Error Handling

You extracted this data, but I want to verify:

[Extracted data]

Original source:
[Source text]

Please:
1. Re-check each field
2. Rate your confidence (high/medium/low) for each
3. Explain any low-confidence extractions
4. Suggest what additional context would help

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4.8 Practical Applications

Month-End Processing

Use AI to accelerate month-end:

• Extract data from late invoices
• Process expense reports quickly
• Compile bank reconciliation data
• Summarize key contract terms for accruals

Audit Preparation

Extract and organize:

• Selected invoice samples
• Contract key terms
• Bank statement details
• Lease information for ASC 842

Due Diligence

Rapidly process:

• Financial statement data
• Material contract terms
• Tax document summaries
• Accounts receivable details

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Module 4 Summary

Key Takeaways:

1. AI understands context: Unlike simple OCR, AI can interpret documents and extract meaning from varied formats.

2. Structure your requests: Clear, specific prompts with defined output formats yield better results.

3. Always verify: AI extraction is a time-saver, not a replacement for verification. Spot-check critical data.

4. Handle sensitive data carefully: Be thoughtful about what documents you process through AI tools.

5. Build templates: Develop standard prompts for your recurring document types to improve consistency and efficiency.

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Preparing for Module 5

In the next module, we'll explore using AI for forecasting assistance. You'll learn to:

• Build budgets and forecasts with AI support
• Conduct scenario analysis
• Create cash flow projections
• Develop revenue forecasts

Before Module 5:

• Try extracting data from a sample invoice
• Practice the contract extraction template
• Consider which document types consume most of your time

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"AI can read a thousand documents faster than you can read one. Your job is to know what to do with what it finds."

Ready to continue? Proceed to Module 5: Forecasting Assistance.