We’ve written about accounts payable automation and invoice automation before, where we highlighted that AP processes can be mostly automated and shared criteria to select the right vendor. Automation is necessary for accounts payable because manual processing of accounts payable is
- expensive since manual processes require labor which is costly
- prone to excessive payments: A company can lose up to 4% of the amounts of money paid through invoices because of various errors such as duplicate invoices, fraud, missing early payment discounts and not noticing price hikes.
- leads to dissatisfied employees and suppliers: No one likes a slow manual process
This article explains tasks within AP where businesses can leverage AI and the benefits of implementing AI into account payable processes:
AI applications in Accounts Payable
There are various daily manual tasks accounts payable teams handle. These tasks are repetitive and hardly require human judgment due to their rules-based structure. Some example repetitive tasks in accounts payable are:
- data entry
- matching invoices to supplemental documents
- invoice routing
- invoice filling and retrieval
All these processes can be automated via artificial intelligence. Machine learning algorithms with the support of business rules can
- identify and extract required data from documents,
- input data into required documents
- link data for exceptions resolution
- route documents to the appropriate individuals for validation and exceptions handling
Categorization of documents sent along with invoices
Invoices can be sent bundled with contracts and invoice recipients can also receive documents like credit notes or payment reminders. Combination of Optical Character Recognition (OCR), Natural Language Processing (NLP), and machine learning enable businesses to extract relevant data, understand the context, and categorize these documents. Automation of this process enables businesses to transform their documents into digital systems and ease search functionality.
Any company can be challenged via fraudulent actions. Accounts payable fraud is mostly attempted in the form of fraudulent invoices being submitted for payment. Types of accounts payable fraud are:
- Invoice fraud: Involves a fraudster sending an invoice as one of the companies existing suppliers or pretending to be a new supplier. The invoice includes the bank account details of the fraudster.
- Billing scheme: The fraud type that involves employees generating false payments that will be paid to themselves.
- Check tempering: Check fraud involves a person attempting to make a transaction using a check that has been faked, stolen, altered, or invalid.
- Expense reimbursements: A fraudulent payment scheme in which an employee makes a claim for reimbursement of false or exaggerated business expenses. Expense reimbursement fraud can be occurred due to
- Mischaracterized expenses
- Overstated expenses
- Fictitious expenses
- Double claims
- Automated clearing house (ACH) fraud: ACH fraud involves any unauthorized funds transfer that occurs in a bank account.
- Kickback Schemes: A form of negotiated bribery in which a commission is paid to the bribe-taker in exchange for services rendered.
Artificial intelligence can analyze patterns in invoices to identify any non-standard behavior that may indicate a fraudulent document. Once the AI detects frauds, it flags fraudulent transactions and informs necessary decision-makers. In addition, master data management (MDM) best practices helps companies detect changes in payment details and help identify common invoice fraud attempts.
Identification of errors
Human error is one of the most common accounts payable problems. Though it seems simple, human-made errors may result in serious losses that could have been easily preventable. Some human errors include lost or misplaced invoices, duplicate data, and poor data entry. Sophisticated AI algorithms can process invoices to catch invoice errors and duplicate payments.
Though fraud transaction detection and identification of errors are important AI applications in audit, they are not the only ones. Feel free to check our article where we examined AI applications in the audit industry.
Benefits of AI in AP
Common benefits of artificial intelligence in account payable process are
- Faster resolution cycles & increased focus on more value-added activities: Automation enables organizations to handle invoice processing much faster than an employee would do manually. Faster invoices resolution frees the accounts payable team’s time so that they can focus on more value-added tasks.
- Improved financial planning: AI makes forecasting faster and more accurate than humans. Insights from historical data such as recurring invoices help businesses decide when to release cash or take early-payment discounts.
- Reduced errors & Improved compliance: Manual processing of invoices involves various compliance and security risks. Appointing machines to handle these processes reduces the number of people who access the document and reduces the likelihood of human errors that may lead to compliance issues.
- Reduced costs: Due to all reasons we listed above, along with the elimination of high paper storage and retrieval costs in account payable processes, organizations that fully automate accounts payable processes can save significant amount. Full automation can save on average of 4% of expenses when compared to organizations that manually process invoices.
If you still have questions about AI in accounts payable processes, don’t hesitate to contact us:
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