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Artificial intelligence or AI has been the subject of debate recently, with many people associating AI with robots poised to take over the world. The reality of AI is much less dramatic, though no less impressive.
Artificial intelligence is built on the principle that human intelligence can be mimicked by a machine using a set of specific instructions, called an algorithm. Without those instructions, AI would not exist.
AI can be a handy resource for your entire accounting department, but an area where it’s been proven particularly useful is the accounts payable department, where invoice processing hurdles remain.
In the State of ePayables 2023, from Ardent Partners, AP teams have identified the following as the top hurdles faced in the payable process:
63% said that invoice approvals take too long
47% said there were too many exceptions
22% cited high processing costs involved in accounts payable
21% cited a lack of insight into both invoice and payment data
21% had issues with late supplier payments
20% thought there was too much paper involved in their current AP process
Automating your AP function using AI will help address these issues and more.
How Is Artificial Intelligence Used in Business?
From Marketing to operations to sales, AI can be used in many different business environments to reduce time spent on repetitive tasks, improves employee productivity, and enhances customer experience.
It also helps avoid mistakes from manual errors and can be used to detect problems or analyze data. An example many people will be familiar with is the use of chatbots on websites.
Chatbots can be helpful for customers visiting your website or requesting help or some type of assistance. Often, chatbots can be automated to help answer low-level inquiries, leaving your customer service team to deal with more complex issues.
How Is Artificial Intelligence Used in Accounting?
If your accounting software application connects to your bank accounts, that technology is courtesy of AI.
Today, the use of artificial intelligence in newer accounting software applications has helped to eliminate a number of time-consuming tasks that once had to be completed manually.
Popular accounting software applications currently use AI to automatically categorize expense transactions, reconcile bank statements, and generate financial statements, with more high-end applications also offering data analytics and financial insights.
Can Accounts Payable Be Automated?
Because of the number of manual tasks traditionally performed by the accounts payable team, it’s the perfect area to introduce an AP automation application.
AP automation can accept, scan, and process incoming invoices automatically, eliminating the need to enter invoice data manually.
AP automation also flags potential issues such as duplicate invoices or payments so that they can be reviewed and addressed promptly.
How Does Automated Accounts Payable Work?
Automated accounts payable is just like it sounds, with the application automating the tedious, time-consuming parts of AP. The typical AP process includes the following tasks:
Purchase Order Processing
Purchase Order Approval
Invoice Receipt and Distribution
Three-Way Matching (Invoice, Purchase Order, and Delivery Receipt)
Invoice Approval (if No Purchase Order)
Invoice Coding and Data Entry
Invoice Payment
There are variations in this process. For instance, if your company does not utilize a purchase order system, you’ll only match the invoice with the delivery receipt.
Without a purchase order system in place, you’ll also need to send invoices for approval prior to entering them into your accounting software application.
You can also assign a GL posting code to the invoice line items which will later be recognized when a similar invoice is received.
For example, if you receive an invoice for wood 2×4 panels, you can assign a GL code and the next time you receive a similar invoice from that vendor, the item on the invoice will automatically be posted to the same GL code.
There is also an opportunity to adjust any information that may be read inaccurately.
But along with data entry, AP automation can also easily handle another time-consuming AP process; invoice matching. For auditing purposes, all incoming invoices should be matched with a corresponding purchase order and shipping receipt.
Depending on the number of invoices your business processes, invoice matching can take a significant amount of time, particularly when a variance is found.
AP automation will automatically match incoming invoices to all supporting documents, flagging those that need to be investigated for potential issues such as duplicate payments.
But perhaps the best part of AP automation is the electronic invoice approval process that will direct invoices to the correct approver or approvers, eliminating lost and misplaced invoices and approval delays.
What Is Robotic Process Automation?
Robotic Process Automation (RPA) sometimes referred to as software robotics, uses software automation to mimic tasks traditionally completed by office staff such as data extraction and form completion.
Focusing on task automation, RPA is the workhorse in automation, performing the tasks, rather than determining what tasks need to be completed.
What Is the Difference Between AI and RPA?
Robotic process automation is often mistaken for artificial intelligence, but the two are very different.
AI is the thinker of the two, using automation, machine learning, reasoning, and analysis to recognize patterns in unstructured data while learning and remembering those patterns over time.
On the other hand, RPA requires human intervention to automate repetitive processes that have been defined by an end user. That said, AI and RPA work well together, with their respective strengths complementing each other.
How Can RPA and AI Be Used for Accounts Payable Automation?
Most companies introduce automation into their business by using RPA, which automates repetitive tasks that use a rules-based scenario.
For example, if the invoices you receive from your vendors always contain the exact same fields, RPA would be sufficient to automate invoice processing.
However, it’s likely that your business receives invoices in a variety of formats, which RPA alone will struggle to process.
That’s where AI comes in handy since AI is able to train OCR to scan and RPA robots to process invoices in a variety of formats.
What Are the Benefits of AI in Accounts Payable?
Implementing AI provides immediate benefits to your accounts payable department, starting with the following:
A More Streamlined AP Process
From extracting data from invoices to automatically routing invoices to the appropriate approvers, the entire AP process will be much smoother and your invoice cycle time much faster.
The Ability To Take Advantage of Discounts
Tired of wasting the early payment discounts that your suppliers offer you? Using AI, you’ll be able to process invoices much faster, which will enable you to finally take advantage of those discounts.
Slow approvals, lost or misplaced invoices, and duplicate invoices or payments made in error become a thing of the past, which can strengthen your business relationships.
Eliminate Manual Data Entry
The use of OCR and machine learning means that you can say goodbye to entering invoice data manually and the errors that go with it.
Having a recognizable audit trail is a must for any accounts payable department. Using AI, you’ll have access to a complete paper trail for all of your invoices, significantly reducing the possibility of accounts payable fraud.
Eliminating Paper
Using an automated AP system also means doing away with the piles of paper found in any AP department.
Instead of spending hours looking for missing documents, they can be easily retrieved from an electronic filing system at any time.
More Accurate Reporting
With the use of real-time reporting, you’ll never have to worry about whether report totals are accurate or if they include the most recent transactions.
Easy Ways To Introduce Artificial Intelligence Into Accounts Payable
Making the switch to an accounts payable automation software application, like PLANERGY, can be daunting if you’re accustomed to manual processes.
But introducing even a small level of AI technology can give you the confidence to introduce more automated technology into your business.
There are a number of ways that AI and RPA can be introduced into accounts payable. For those desiring a more gradual introduction to AI, here are some best practices when implementing AI in accounts payable:
Get A Better Understanding of AI
Take some time to learn what AI can do for your business. But even more important, learn what it can’t do. AI is powerful, but there is a difference between hype and the reality.
Once you understand its capabilities, you’ll be better able to determine exactly where to begin.
Review Your Team’s Technical Abilities
Evaluate the technical capabilities of your current AP staff. If they’re comfortable with new technology, you can forge ahead.
But if they’re not, you may want to consider bringing someone on board who is comfortable implementing AI and can help manage the change.
Define Goals Your Goals
Before using AI technology, it’s important to set goals. What do you want AI to accomplish?
Do you want to automate the bank reconciliation process? Do your invoices get lost or misplaced when sent to approvers?
Consider starting with accounting software that offers some AI capability to dip your toe into the use of AI in accounting.
Even entry-level software contains some level of AI capability. Your existing software might already use AI and you are just not aware of it.
Find The Right Software Solution
When you are ready, look at an application like PLANERGY to streamline the entire procure-to-pay process, offering purchase request management, approval workflows, purchase order management, and complete accounts payable processing automation.
Once you implement some form of AI, review the results internally. Was it easier or more difficult than you anticipated?
If adopting AI has been a relatively smooth process, you may want to look at adding further automation to your business. But if the process has been filled with problems, some further refinement of the system may be in order.
Track Improvements Against KPIs
As mentioned earlier, once AI has been added to your business processes, it’s important to look at your initial goals and whether AI has helped you reach them.
For example, if you began using AI for accounts payable to improve processing times, have you seen an improvement in invoice processing times?
Looking at your initial goals and assessing whether those goals are being met can help you determine whether adding additional AI tools should be considered.
Artificial Intelligence Can Save Both Time and Money
With increased accuracy, streamlined invoice processing, and more accurate accounts payable reporting, AI can transform your business a lot faster and easier than you may think.
There is no downside to implementing artificial intelligence in your business. Even if you start small, you’ll quickly see the benefits of an automation solution, including reduced invoice processing times and savings on invoice processing costs.
Artificial intelligence is here to stay. Why not take advantage of this cutting-edge technology in your business?
1. Use PLANERGY to manage purchasing and accounts payable
We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:
Visit our Accounts Payable Automation Software page to see how PLANERGY can automate your AP process reducing you the hours of manual processing, stoping erroneous payments, and driving value across your organization.
2. Download our guide “Preparing Your AP Department For The Future”
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3. Learn best practices for purchasing, finance, and more
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