Increasing automation in financial administration has been a bit of a struggle for companies. Sure, there are parts of processes and tasks that have been possible to automate. But one area for which there have not been great automation solutions is purchase invoice handling.
Yet, this is usually where companies have a lot to gain in terms of increasing their automation levels. Some purchase invoices can be handled with rules in accounts payable softwares, but rules can only be applied to a fraction of purchase invoices. Something more is needed to get automation levels up. That something is artificial intelligence (AI).
When people talk about invoice automation, they typically mean purchase order (PO) matching, contract matching, and coding templates. These are the most common ways to use automation in invoice processes.
But there are also other possibilities. Let’s look at an example:
They are usually handled manually. Manually post and route one non-PO invoice takes around 10–15 minutes on average and it tends to be a fairly painful process for those involved. That is a lot of working hours to move 45,000 invoices through the process by hand.
At this point our fictional company starts to wonder if they should only use purchase orders?
It is true that there are some big companies who have implemented the so-called “No-PO-No-Pay” policy. They try to get all purchases done through purchase orders, and if there is no PO number on an invoice, the invoice doesn’t get paid.
But making your invoice process work completely through purchase orders and to get it to work 100% correctly is a massive process and there are only a handful of companies that have managed to make it work. That is because there are a lot of challenges in implementing and running it.
If you want to increase your automation levels, there has to be other, better ways to do it.
One way in which companies try to automate their invoice process is through rules in their accounts payable software. But this is also not without problems. AP automation softwares do not provide sufficient solutions for non-PO invoice automation. Yes, you can automate some of your invoices with rules. But not all and certainly not most. You will still have thousands of non-PO invoices on your lap to process by hand.
We have mapped hundreds of invoice handling processes for hundreds of companies and it is always non-PO invoice handling that has the lowest automation levels, usually between 10% and 25%. Only a very few companies we have met have had non-PO automation levels over 25 %.
This is because building and maintaining those automation rules is very time-consuming and complex work that has to be done by hand. Companies typically have to create hundreds, even thousands of rules for non-PO invoices because there is a lot of variation between them.
Rule-based invoice automation does still have some role in invoice automation, but in order to truly get your automation levels up, you need a better way. This is where AI comes in.
AI is the key to getting automation levels up in financial administration generally and in accounts payable specifically. But the buzz that has been surrounding AI in recent years have left financial administrators to wonder if there even are workable solutions.
In fact, the problems AI can solve are pretty ordinary: make the cyclical work more smooth, ease the workload, improve the quality of reporting, decrease mistakes in processes etc. Day-to-day work, not rocket science.
Here’s a non-exhaustive list of benefits AI can bring to financial administration processes:
So there is much to gain. But let’s turn our attention to the accounts payable process next.
AI is the most effective way to post and route non-PO invoices. It is not complicated or difficult. In fact, it is easy and quick to implement and to use.
Generally speaking, quite a lot. Here’s a list of steps that can benefit from automation:
If you can automate even some, if not all, these steps, you are increasing your invoice automation with leaps and bounds.
Yes, we are biased. But let us tell you in 30 seconds what our AI can do:
When all those aspects are in place, we move from the status quo of low level automation to automation land.
Have a look at this picture:
The status quo describes a typical situation we see when we work with companies. Their non-PO invoice automation level is between 15-25%. On top of that there are a bunch of invoices that need to be manually handled.
With AI you can really increase your purchase invoice automation. Your current AP system can automate the invoices it can, but there will still be a sizable amount of invoices that you are not able to automate. AI is the fastest way to handle those. We have clients whose automation levels have risen from 25% to 90% within two years of implementing AI.
When you start to utilize AI, you don’t need to create any rules. AI learns from your historic data and creates automation rules from historic invoices and postings.
AI systematically combs through old invoices one by one.
But what if AI makes a mistake?
If AI makes a mistake, it learns from it and adjusts for future invoices. Let’s say a reviewer sees a mistake AI has made on an invoice. For example, AI has predicted the cost center incorrectly. The reviewer corrects the mistake.
Once the invoice has gone through the review and approval process, and the invoice is ready to be booked and paid, the system will send the final posting information back to the AI. AI looks at the final posting information and compares it to how it had predicted it. It then sees there is a change and understands it has made a mistake. It learns and adjusts its rule for the future.
This is how AI will get better and better with every single invoice. All that is needed is data.
AI does not replace humans. AI needs a teacher and people are the best teachers it can have. The core attribute AI has is that it constantly learns, it never forgets and it is never affected by rush times, stress, bad days, or sick leaves. It plows on no matter what. And once you combine human taught AI with your accounts payable software, you will automatically cover the majority of your purchase invoices and get your automation levels up.
The Snowfox.AI service can route and post your purchase invoices automatically with artificial intelligence. You no longer have to worry about manual tasks.