What are the best AI use cases in accounts payable?

AI’s everywhere these days. Or at the very least, people are talking about it everywhere. And you’ve probably heard a lot about how it’s going to change everything – particularly in finance. And particularly in accounts payable (AP), because AP is of course the part of the finance function most amenable to automation, and generally the quickest to embrace new technology.

But exactly where can AI help your accounts payable processes?

We’ve been developing AI-enabled solutions for some time now, so we’re well positioned to provide realistic and practical answers. We believe – in fact, we  know– that AI can significantly enhance your AP process. Principally by automating elements of the process that most organizations still handle manually, but also by using predictive and learning models to figure out the best ways in which your organization can make payments to optimize working capital, capture discounts, and improve supplier relations. 

In this article, we’ll cover some of the most productive AI use cases in accounts payable.

Accounts payable’s role in the procure to pay process

To understand how AI can enhance AP processes, we’ll need to quickly put accounts payable in its wider organizational context. Accounts payable is a critical part of the broader “Procure to Pay” (P2P) process, which, as the name suggests, encompasses the entire lifecycle of service or product acquisition from procurement to payment. 

Accounts payable’s key contributions to P2P include:

Invoice verification and invoice processing: AP teams are responsible for receiving, verifying, and processing supplier invoices. This includes ensuring that the goods or services have been received and match the purchase order and delivery receipt.

Before invoice processing even begins, AI helps accounts payable teams with two major tasks: 

• Data extraction: AI-powered OCR (Optical Character Recognition) allows your AP system to extract data from invoices automatically without the need for any human involvement. This has the potential to eliminate most manual data entry tasks while also reducing the errors that slip in when your people are processing hundreds or thousands of invoices by hand.
• Invoice matching: AI solutions can match invoices with purchase orders and delivery receipts automatically to ensure accuracy, eliminate data entry and re-entry tasks, consolidate information, and flag any discrepancies for escalation and review. Invoices that are matched can be automatically posted without being touched by the AP team. 

AP automation software can also help business users manage the invoices that need further processing. AI plays a crucial role in automating the invoice approval and exception handling process via:

• Smart routing with AI allows your systems to intelligently route invoices to the appropriate approvers based on predefined rules, roles, and past behaviors.
• Automated invoice coding ensures invoice items are properly accounted, with AI automatically assigning the correct cost center to line items and prompting users to provide other relevant accounting information. 
• Automated approvals allow invoice invoices that meet certain criteria (e.g., below a certain amount, matched to purchase orders, with certain suppliers), to be approved without human intervention.
• Real-time notifications ensure approvers are aware of outstanding invoices and can make decisions in a single click, reducing bottlenecks.

All of which provides your people at all levels with the confidence that they’re only getting involved in cases where their specific input is really needed to advance the process.

Payment processing: Once an invoice is verified, processed and considered “OK to pay”, AP handles the scheduling and execution of payments to suppliers. This includes selecting the appropriate payment methods and ensuring timely payments to maintain good supplier relationships. In many organizations, this process is still largely manual, with payment files being built out of spreadsheets that require a lot of tedious data entry work. 

AI helps here by facilitating payment automation based on a complete overview of your company’s financial data and available fund sources. AI powered solutions can take account of predefined rules, invoice terms, cash availability, and other criteria chosen by you to not only ensure payments are made by their due date, but also that they’re made from the most expedient bank account and on the most appropriate day to capture discounts for early payment, ensure supplier relationships stay positive, and keep your business in a position of optimal cash flow and financial health.

Discrepancy resolution: AP resolves any discrepancies between invoices, purchase orders, and delivery receipts. This involves communicating with suppliers and internal departments to clarify and rectify any issues. As we’ve already covered, AI helps this part of the process along by handling much of this data reconciliation itself, minimizing supplier contact, helping resolve disputes before they start, and ensuring a proper paper trail is maintained for every invoice, purchase order, and payment request. This also makes AI a powerful ally in preventing duplicate payments – every invoice and transaction associated with it can easily be located and confirmed before any errors take place.

Crucially, because AI can also detect anomalies in large datasets much more effectively than a human can, it can play a key role here in fraud detection via two routes:

• Anomaly Detection: AI analyses transaction patterns to identify any unusual activities that may indicate fraud. Machine learning algorithms can detect subtle anomalies that humans might miss based on trends over time and typical supplier invoicing habits.
• Vendor Authentication: AI can verify vendor information against multiple databases to prevent fraudulent vendors from submitting invoices and take the strain off your AP teams when it comes to engaging in forensics. They’ll only need to examine transactions your system has identified as potentially originating with fake vendors, rather than combing over every transaction in a payment run themselves.
• Expense tracking and reporting: AP tracks all payable transactions and maintains records for financial reporting and analysis. This information is crucial for managing cash flow, budgeting, and auditing. AI comes into its own again here by making spend analysis a much simpler and more robust process via:
• Spend categorization: AI automatically captures and analyzes spend data, providing insights into spending patterns, identifying cost-saving opportunities, and ensuring compliance with budgets in real time.
• Predictive analytics: AI can also predict future spending patterns based on historical data, helping businesses manage cash flow more effectively.

These capabilities also make AI extremely effective in supporting AP’s compliance and control functions, helping your business adhere to internal policies and external regulations. This includes payment terms as discussed above, but also tax regulations (both existing and new, including new global e-invoicing mandates) and internal controls to prevent fraud and errors.

Supplier management: AP manages supplier relationships following the procurement process by maintaining accurate supplier records, handling inquiries, and ensuring prompt resolution of payment-related issues. AI can help out here with:

• Performance monitoring: Keeping real time watch on vendor performance by analyzing metrics such as delivery times, quality, and compliance makes AI enabled solutions a key part of any organization’s forward strategy for optimizing spend. (AI can even provide automated feedback on any aspect of a supplier’s performance as requested, expediting supplier performance reporting cycles and giving your organization a clearer view of its position).
• Risk assessment: AI can assess the financial health and risk profile of suppliers with reference to various data sources, helping businesses mitigate supply chain risks by identifying suppliers in potential distress and helping your teams secure alternatives ahead of major disruption.

AI backed AP automation software solutions can also improve collaboration with suppliers, not just through simple fixes like the provision of centralized vendor portals to allow self-service, improve visibility of payments, and reduce back and forth communication, but also by ensuring faster timely, accurate payments with a faster dispute resolution cycle and enhanced transparency.

How can Serrala help you bring AI into your AP workflow?

Serrala solutions are designed to create a coherent, end-to-end ecosystem for your invoice-to-pay processes that simplifies your accounting workflows and allows for full working capital optimization. Our SAP-integrated FS² Accounts Payable and cloud-native Alevate AP platforms are already AI-enabled, and our customers are already leveraging the use cases described above to optimize their working capital position and unlock strategic value in their supplier relationships and across the wider financial landscape.

To learn more about how we can help you navigate AP digital transformation, integrate AI in your processes, and revolutionize your approach to accounts payable – and how our solutions can streamline and automate every part of the process for greater efficiency, transparency, and decision velocity, check out our resource pages here.