Why businesses need more automation and AI in accounts payable processes
For many companies, invoicing is still a frustrating process. Approvals are handled manually, shared inboxes quickly become crowded and hard to manage, and spreadsheets get passed around as teams try to find the right person to review them.
This not only slows down the finance function, but can also reduce visibility and control across the wider organisation. At the same time, supplier invoices contain critical information about costs, suppliers and financial compliance. When invoices are handled manually, a lot of this information is difficult to track, analyse or use effectively.
Accounts payable automation helps businesses automate how supplier invoices are captured, validated and processed. This makes the process significantly more streamlined while also helping finance teams gain clearer insight into supplier costs and financial data. Increasingly, organisations are also using AI to automate tasks such as invoice data extraction, verification and supplier enquiries.
In this article, we speak with Richard Lindqvist, Business Manager at Columbus Sweden, about AP automation, where AI fits in, and how organisations can get started improving their accounts payable processes.
Increasing use of AI in AP automation
AI is becoming an increasingly popular tool in accounts payable automation. One reason for this is that AI works best when there’s structured data available. Finance processes already contain a lot of structured and historical data, making it easier for businesses to apply AI compared with other business processes.
“For example, AI and RPA can be used to automate the interpretation of invoice documents and determine how the process should work when buying from a specific supplier. Since businesses already have structured and historical data in this process, they can use it to streamline operations instead of manually checking every invoice,” explains Richard.
AI can support several areas of the AP process, including:
- Interpreting invoice documents– AI supports AP invoice automation by extracting supplier details, payment terms and line items directly from invoices, removing the need for manual data entry.
- Financial coding of costs– AI can analyse historical transactions to determine how costs should be allocated in the general ledger.
- Invoice verification and exception handling– AI can automatically compare invoice details with purchase orders and goods receipts, allowing compliant invoices to pass through the process automatically while flagging exceptions for review.
“For businesses with transaction-heavy global supply chains, AI brings significant value by automating the handling of supply chain invoices. This includes three-way matching between purchase orders, goods receipts and invoices, as well as managing the several different scenarios that can happen in the process,” says Richard.
Richard highlights a recent example from a global retailer he’s worked with that’s implemented AI across several areas of its accounts payable process:
- Automatic recognition of invoice information – AI extracts supplier details, payment terms and line-item information directly from invoice documents, removing the need for manual data entry.
- AI-driven purchase order matching – invoices are automatically matched against purchase orders and goods receipts, allowing the system to determine how each invoice should be handled across hundreds of possible scenarios.
- Supplier enquiry handling – when suppliers email to ask about invoice status or payment timelines, AI agents automatically respond, removing the need for finance teams to manage these requests manually.
- Financial reconciliation with suppliers – AI automatically reviews invoices, credit notes and other documents to determine the final balance between the company and its suppliers at month end.
- AI-powered finance assistant – employees can interact with a chatbot-style assistant to ask questions about invoices, coding or financial processes, helping them quickly find the information they need.
“The company is fully committed to using AI across multiple parts of the accounts payable process to automate work that previously required a lot of manual effort,” says Richard.
Challenges with AP automation
Accounts payable is a standard business process that all organisations need to manage, and many will already have some level of automation in place. However, for a lot of businesses, there’s often still significant opportunity to build a more automated accounts payable process. Achieving higher levels of automation, though, comes with its own challenges.
One reason is the complexity involved in handling supplier invoices. “To automate the process successfully, organisations need the right tools capable of managing many different scenarios depending on how goods or services are purchased. In many cases that number can easily exceed 500,” explains Richard.
Another major challenge is legislation. Businesses must ensure they remain compliant with regulations governing supplier transactions, particularly as governments introduce stricter rules around tax reporting and digital invoicing to reduce fraud. “We see a lot companies still handling invoices through email and manual approvals. As new regulations are introduced, organisations increasingly need software that can meet those requirements,” says Richard.
While ERP systems can handle many financial processes, they’re often not designed to manage the full complexity of accounts payable automation. As a result, many organisations turn to specialised solutions. “For organisations with a global supply chain the need is clear, because calculating the true cost of goods becomes complex when multiple vendors are involved,” adds Richard.
This was the case for one food and beverage company Richard recently worked with that wanted to understand the true cost of a product within its supply chain. Although the product itself was sourced from a single supplier, several additional costs were involved before it reached the market. These included international shipping, temperature-controlled containers and customs duties. The supplier also invoiced the shipment in individual items rather than by weight, while some of the goods were lost during transport or didn’t meet acceptable quality standards and had to be discarded.
When all these factors were combined, calculating the real cost of each sellable item became more complex than it first appeared. “By automating the price calculation, the company was able to accurately determine the true cost per unit and ensure the product was priced correctly when sold to retailers,” explains Richard.
Another example of a customer that successfully achieved higher levels of automation in accounts payable is a global retailer that sources products from suppliers and resells them in the Nordic market. The company processes a significant volume of invoices each year, including thousands every day. “Through accounts payable automation, the organisation has been able to process the majority of invoices automatically, allowing finance teams to focus only on the small number that need attention,” says Richard.
Automation in accounts payable can also play an important role in managing legislation and regulatory compliance. Richard highlights another example involving a global manufacturer that operates across dozens of countries, each with its own invoicing and reporting requirements.
Manually managing these varying regulations quickly became difficult. The organisation needed a way to ensure that invoicing, compliance and government reporting could be handled consistently across all locations.
“We helped them standardise their processes and ensure compliance requirements were met across their global operations. They can now have all documentation ready at the push of a button when reporting to governments, even though they operate across a complex supply chain and legislative landscape,” says Richard.
How to implement AP automation effectively
To automate accounts payable effectively while maintaining compliance, businesses need the right platform that integrates properly with their ERP system. Medius AP Automation, for example, is a modern platform designed to scale with your business and help automate and optimise the accounts payable process.
However, regardless of which solution your business chooses, success also depends on working with the right implementation partner. “We work with businesses to implement and optimise AP automation software like Medius so they work effectively with their existing ERP system. We’ve also developed integrations that connect Medius with both Microsoft and Infor ERP platforms, helping organisations implement the solution faster and more efficiently. On top of that, we’re one of the few partners able to deliver the Medius integration within Microsoft Dynamics environments,” adds Richard.
At Columbus, our approach includes advising on best-practice processes, configuring workflows and ensuring the solution supports your specific business, financial and regulatory requirements. Our teams also bring practical experience in applying AI within finance processes, helping you identify where AI can add the most value across your accounts payable lifecycle.
With any IT project however, there’s an important change management aspect to consider. That’s why we provide end-to-end advisory support with expertise in change management and stakeholder engagement to help you:
- Ensure adoption and real usage of the solution
- Protect the expected return on investment
- Drive behavioural and cultural change across teams
- Reduce resistance and operational disruption
“We provide long-term onboarding because this type of software impacts the entire organisation, not just the finance team. Our goal is to make sure people understand the process and have tools that make their work easier. We combine the right people, expertise and technology to help organisations implement the solution that best fits their business needs,” says Richard.
Improve your accounts payable process with automation and AI
By automating how invoices are captured, validated and processed, businesses can improve efficiency, reduce manual work and gain greater visibility into supplier costs and financial data. With AI playing an increasingly important role in accounts payable, organisations can automate more of the accounts payable lifecycle and improve efficiency across the process.
If you’d like to find out more about how AP automation and AI can improve your accounts payable processes, our experts would be happy to help. Contact us via the button below.
