No finance task is as big a drag on back-office efficiency as accounts payable (AP).
According to the Institute of Finance and Management (IOFM), controllers rank AP as the most paper-intensive, time-consuming, and labor-intensive function in finance and accounting (F&A)—topping notoriously burdensome functions such as accounts receivable (AR), tax and reporting, and payroll.
AI is revolutionizing AP by transforming its processes into streamlined, data-driven workflows. By accurately extracting information from even the most complex invoices, AI enables businesses to automate and optimize tasks like reading invoices, checking for errors, and getting them approved for payment. This newfound efficiency not only reduces costs but also empowers AP teams with real-time visibility into financial data. Plus, AI's ability to spot errors and ensure compliance adds an extra layer of protection against fraud and financial risks.
AI is bringing about a paradigm shift in AP. Let’s delve into some key areas of transformation:
Invoice processing across all formats
AI automation solutions can handle a remarkably wide variety of invoice types. Traditional paper invoices that have been scanned into digital images, handwritten receipts, PDFs, and structured electronic invoices can all be handled automatically. Regardless of the format, advanced technologies like optical character recognition (OCR) and machine learning are used to accurately extract the necessary data.
End-to-end automation and streamlined workflows
From invoice capture to payment execution, AI enables touchless processing. That streamlines the AP workflow and eliminates bottlenecks. AI solutions can also scale up easily to handle increasing invoice volumes during peak periods.
Fraud detection and discrepancy management
AI can spot unusual patterns or inconsistencies in invoices, flagging them for your review so you can catch potential fraud or errors before they become a problem. The technology also helps prevent duplicate payments and safeguards your company’s finances. In addition, AI enhances compliance standards by automatically checking invoices against your internal controls and external regulations.
Cost savings
By automating tasks like manual data entry and invoice matching, AI frees up valuable resources and significantly cuts labor costs for your business. Plus, the speed of AI-powered invoice processing lets you capture early payment discounts to boost your bottom line. AI’s precise data extraction also minimizes errors that lead to costly late fees.
Advanced reporting and analytics
AI can empower you with real-time financial insights: You can track invoice processing times, payment cycles, and outstanding liabilities as they happen. AI can go a step further to analyze your spending patterns, identifying cost-saving opportunities and giving you a leg up in supplier negotiations. It even helps you look to the future by forecasting cash flow needs.
Enhanced vendor management and compliance
Vendor management becomes proactive and risk-aware with AI. By automating the onboarding process, AI ensures all necessary documentation is collected and validated. AI can also analyze vendor data to assess risk and identify potential issues before they impact operations. To further reduce risk, AI can monitor vendor compliance with contractual terms and industry regulations.
Better employee experience
By automating routine processes and providing valuable insights, AI can allow AP professionals to contribute more meaningfully to their organization’s financial health and success. This shift not only enhances job satisfaction but also fosters a culture of innovation and continuous improvement within the AP function.
Smart integration
Seamless integration with existing business systems is a key feature of AI solutions. Your business process management (BPM), enterprise resource planning (ERP), and robotic process automation (RPA) can all work alongside AI tools, eliminating the need for manual data transfer and ensuring data consistency across platforms. AI solutions are also designed to be flexible and adaptable, making them capable of accommodating changes in business processes and evolving technology environments.
Modern AI solutions—particularly those built on low-code/no-code (LCNC) platforms that allow users to create and customize workflows using simple, user-friendly interfaces instead of writing complex code—allow businesses to easily implement powerful tools without requiring advanced technical expertise. AI's ability to handle complex tasks, from detecting fraud to streamlining vendor onboarding, provides enhanced control and transparency in AP processes. Here are some popular real-world applications:
Intelligent data extraction
AI solutions automatically capture key data points and line-item details—such as vendor name, invoice number, date, line items, and totals—even from complex, multi-page invoices with varying formats. This eliminates manual data entry, reducing errors and accelerating invoice processing.
Touchless invoice processing
AI can automatically classify invoices based on vendor, type, or other criteria, and route them to the appropriate approvers or departments. For example, invoices from a specific vendor might always be routed to a particular manager for approval. Advanced AI solutions even let your AP team easily customize classification rules and routing workflows without technical expertise
Payment automation and reconciliation
By automating tasks like generating payment files from approved invoices and initiating transactions directly through integrated banking systems, AI can simplify payment processes. AI can also catch and flag duplicate invoices to avoid overpayments and assist with reconciliation by matching payment data with invoices. In complex scenarios, AI can analyze multiple data sources such as bank statements and enterprise resource planning (ERP) records to reconcile payments even when there are inconsistencies or missing information.
Fraud detection and prevention
If a vendor suddenly submits an invoice to your business with a much higher total than in other months, AI can flag this document as suspicious. AI algorithms learn from normal transaction patterns, enabling them to identify irregularities in invoice data, whether that’s unusual vendor activity or inflated prices. Low-code/no-code (LCNC) solutions offer pre-built anomaly detection models, allowing businesses to quickly customize and deploy them without the need for advanced technical skills.
Vendor onboarding and management
By collecting and validating essential information automatically, AI simplifies vendor onboarding. Businesses can use AI to automatically cross-check tax information, business licenses, or certifications to ensure compliance. Beyond onboarding, AI can connect with your ERP platform to offer a single source of truth for vendor information.
Compliance monitoring
AI can help keep your business compliant by automatically tracking adherence to contractual terms, industry regulations, and internal controls. Plus, by processing electronic, PDF, and paper invoices in a unified workflow, AI seamlessly integrates e-invoices into your accounts payable processes in line with government mandates for electronic invoicing.
Reporting and analytics
The best AI solutions offer pre-built dashboards and reporting tools that deliver real-time insights into key AP metrics, such as invoice processing times, payment cycles, and outstanding liabilities. AI tools can also analyze spending patterns, highlight areas for cost savings, and forecast future cash flow needs based on past data and payment trends.
1. Assess your AP process needs
Start by evaluating pain points and inefficiencies in your current AP workflow, such as slow invoice processing, frequent errors, or compliance challenges. Then, determine where automation can have the most impact. Also, figure out what level of technical expertise your AP team has: This will determine how complex your tool can be. Understanding these needs will help you choose the right AI solution to deliver a greater ROI for your business goals.
2. Select the right AI solution
Choose a purpose-built AI solution designed specifically for accounts payable automation, ensuring that it aligns with your team’s capabilities. Many AP teams aren't made up of technical experts, so consider low-code/no-code (LCNC) solutions that match their skill level and allow for easy implementation and integration.
3. Automate invoice and payment processing
Now it’s time to put the tool to work. Today’s advanced AI solutions let businesses hit the ground running, processing complex, multi-format documents straight through, error-free, from day one. Begin using AI to seamlessly handle electronic, PDF, and paper invoices in a unified workflow.
4. Finetune for your specific needs.
Customize your AI solution to align with your unique requirements. For instance, you may want to detect particular anomalies or set parameters to flag suspicious invoices, helping to prevent fraud and ensure compliance with contractual terms, internal controls, and external regulations. LCNC solutions provide pre-built anomaly detection models that you can customize and deploy without advanced technical skills.
5. Monitor and optimize
Now everything is fully up and running, and you're ready to keep optimizing from here. Use your AI solution's real-time insights into key AP metrics to monitor processes and spot even more cost-saving opportunities.
Plenty of tools on the market today promise to automate invoice processing. Leading technology brands like Amazon, Google, and Microsoft offer capabilities in this space, while robotic process automation (RPA) vendors such as UiPath and Automation Anywhere include automated document capture in their portfolio. Plus, a wide range of purpose-built accounts payable automation solutions such as Tipalti, NetSuite, SAP Business One, and AvidXchange provide targeted options for AP optimization.
Yet despite the wide range of solutions available, 84% of a typical AP practitioner’s workday is still spent on manual tasks like keying invoice data, shuffling paper and emails, fixing mistakes, and responding to calls and emails from suppliers about the status of invoices and payments, according to the IOFM. The institute also reports that AP managers find themselves spending more time on transaction processing than on higher-level responsibilities like staff recruitment, data analysis, collaboration with fellow stakeholders, and other core managerial duties.
It’s tempting to blame the lack of automation for the manual tasks slowing down AP teams. However, nearly half (48.9%) of AP departments already use automated invoice processing solutions. Among those, a quarter have automated their end-to-end procure-to-pay (P2P) process.
So, why do so many AP departments still process such a large volume of invoices manually?
Many AP departments have invested in automation tools that are incomplete or only address part of the process. For starters, only 61.7% of AP departments with automated invoice processing technology have actually only automated the capture of key details like invoice numbers, due dates, amounts, and other header and line-item information. Likewise, less than two-thirds of departments have automated the process of matching invoices with purchase orders (POs) and delivery receipts stored in their ERP systems. This means many AP departments still rely on manual, error-prone data entry for these crucial details, despite having adopted accounts payable automation to some degree.
To be fair, some individual functions have been automated across most of the industry. An impressive 68.8% of departments have automated approvals, for example. Yet because most AP departments have taken a piecemeal approach to automation, many gaps in the invoice processing cycle remain, contributing to higher costs, more errors, and less visibility.
The biggest reason that most finance departments fail to unlock the full benefits of AP automation is that their current solutions rely on outdated methods for capturing invoice data and matching it to purchase orders (POs). Consider the typical approach to invoice capture. Over half of AP departments that have automated their invoice data capture (55.3%) rely on optical character recognition (OCR). Yet while OCR helps AP departments reduce the need to manually key invoice data, traditional OCR systems:
- Require AP teams to build templates for each new invoice format.
- May lack the flexibility to extract custom fields or adjust for specific table headers.
- Demand significant coding and in-house development expertise to maintain.
- Need to be retrained to process invoices in multiple languages.
- Lack the flexibility to Integrate with upstream and downstream systems.
Given these constraints, it’s no wonder that 59.5% of AP leaders believe that human intervention will remain a key part of invoice processing, even as the process gets more automated.
