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In the current high-speed digital world, businesses are always trying to find ways to save money, minimise manual work, and enhance the precision of processes. Among various back-office functions, one of the most transformative in financial operations is automating accounts payable with intelligent document processing (IDP).
Artificial Intelligence (AI), Machine Learning (ML), and new technologies such as Optical Character Recognition (OCR) are redefining what was considered a tedious and monotonous task: accounts payable (AP). This article discusses how companies are adopting these technologies to optimise AP processes. AI in accounts payable has become indispensable.
Understanding the Traditional Accounts Payable Bottleneck
Does the Accounts Payable (AP) department of your company receive hundreds or even thousands of invoices every month? These invoices come as emails, PDFs, and even papers which need to be reviewed, matched with Purchase Orders, validated, and later entered into an accounting system. Each of these steps is tedious, highly prone to human errors, and poses multiple risks regarding payment compliance.
According to a Level Research survey, more than fifty-five per cent of companies manually process accounts payable, which in turn causes delayed payments, duplicate entries, and lost invoices. The severity of these issues showcases the need for accounts payable process improvement with the use of smarter and automated solutions.
What Is Intelligent Document Processing (IDP)?
IDP or Intelligent Document Processing is the combination of artificial intelligence, computer vision, natural language processing, and OCR, which is used to extract informative data from partial or unstructured documents such as purchase orders, receipts, or invoices.
With OCR, the only image processing done is converting from pictures to words. However, IDP takes things further with context verification, data evaluation, and integration of automation rules through business structures to automate entire document workflows.
Know More: Intelligent Document Processing: Complete Guide to Intelligent Document Processing (IDP)
How Automating Accounts Payable with Intelligent Document Processing Works
This is how intelligent document processing enhances the AP cycle:
- OCR Invoice Capture: Key information such as invoice numbers, dates, vendor names, individual items, tax values, and totals are captured and processed using OCR for incoming invoices, regardless of their format, including PDFs, emails, and scanned images.
- Accounts Payable AI Validation: The extracted information is validated by AI models according to rules and databases, for instance, ensuring that the total value of the invoice does not exceed the purchase order or checking if the invoice number is unique and previously unused.
- Approval Workflows & Matching: The accounts payable automation software validates invoices and routes them for approval to the relevant stakeholders, alongside matching them against the PO and GRN.
- Integration with ERP and Accounting Software: Approved information is automatically inputted to the ERP software SAP, Oracle, or Tally – this is done without any sort of manual input.
- Reporting and Auditing: All actions performed are timestamped and tracked while providing windows of real-time dashboards alongside transparent audit-ready documentation – this is extremely beneficial for compliance.
Benefits of Automating Accounts Payable with Intelligent Document Processing
- Enhanced Productivity: Manual invoice entry is time-consuming. With IDP, companies can process thousands of invoices in the time it would take to manually process a few hundred.
- Prevention of Human Mistakes: Different forms of IDP make use of processes that cross-validate in real time and check for consistency, thus reducing the amount of human error.
- Cost Effective: It costs an average of $10-15 to process an invoice manually, according to the Institute of Finance and Management (IOFM). With automation, this cost can be cut by 80%.
- Better Vendor Relations: IDP systems enhance approval workflows and increase routing speed, thus, invoices are approved much faster. This helps in avoiding late fees and aids in vendor trust.
- Better Accuracy and Decreased Chances of Fraud: AI-powered systems flag unusual patterns and enforce audit trails, thus enabling far more accurate and easier compliance with regulatory requirements and financial reporting.
Popular Accounts Payable Automation Tools Using IDP
As of today, numerous solutions for automating accounts payable have highly advanced intelligent document processing features. A few of the most popular in this category include:
- Tipalti: Most appropriate for handling worldwide invoice automation and tax-compliant invoice processing.
- Stampli: Famous for its collaborative platform and AI-enhanced invoice matching functions.
- Kofax AP Essentials: Offers end-to-end automation of accounts payable processes with the addition of advanced OCR.
- Zoho Invoice + Zoho Books: These applications are appropriate for small and medium enterprises that want to combine optical character recognition with cloud-based accounting.
These systems apply AI in conjunction with automation, transforming the approach to AP across industries–including manufacturing, retail, services, and IT.
AI in Accounts Payable: What’s Next?
The incorporation of AI technology into accounts payable processes goes beyond the automation of basic tasks. A new age is on the horizon, accounts payable (AP) systems will not only process invoices, but make decisions about which vendor’s invoices will likely be delayed, the best time to make payments relative to cash flow, and will even automatically negotiate payment terms for discounts.
In the future, AP systems will be able to integrate blockchain technology, which will not only provide a forgery-proof ledger of invoice records but also predictive analysis to anticipate payables trends and budgeting requirements.
Conclusion
Integrating intelligent document processing in accounts payable does not merely integrate technology, but rather, transforms the entire functioning of finance operations. The implementation of AI within accounts payable systems has fundamentally liberated businesses from the shackles of outdated systems and endless manual processing.
The adoption of OCR for invoices, along with automation of workflows and machine learning validation, enables finance teams to increase productivity, enhance efficiency within accounts payable, eliminate unnecessary steps, and strategically reposition themselves ahead of the competition.
For CFOs concerned with the optimally managed expenditures or an AP manager focused on speeding up the invoice cycles, intelligent document processing empowers both to optimise and manage their accounts payable department and harness it to become a forward-moving engine of unparalleled operational efficiency.
