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Generative AI Driving Efficiency for AP Teams

AP has long been characterised by tedious manual processes throughout procure-to-pay, and while most organisations have made some progress using digital invoicing and semi-automated AP systems, there is still a long way to go.

  • April 15, 2024

By Tim Baker

The AI Revolution in Finance

Across every industry and sector, leaders are taking stock of the opportunities AI offers and making plans of how to implement this new technology to improve efficiency, customer experience, and quality. The world of finance, both financial services and in-house finance functions are no different. Among AI’s capabilities, the automation of previously manual tasks is high on the agenda for many, offering huge efficiency gains and avoiding the unavoidable margin for human error present in manual processes. For Accounts Payable (AP) teams, this prospect is particularly exciting. AP has long been characterised by tedious manual processes throughout procure-to-pay, and while most organisations have made some progress using digital invoicing and semi-automated AP systems, there is still a long way to go. AI offers these teams exciting new tools that not only improve efficiency, but improve user experience, minimise errors, and provide the time and data for strategic financial activities.

How does AI Automation differ from existing AP Automation?

Automated AP Tools

Basic AP automation tools have existed for some time, offering limited automation of certain tasks that relies on predefined rules and instructions. For instance, these tools may be able to match an invoice to its matching PO using the PO number but cannot establish matches in the case of discrepancies or a missing PO number.

Autonomous AP Tools

Autonomous AP tools integrate AI to provide new levels of accuracy and efficiency. These tools go beyond simple rule-based automation and have the capability to handle exceptions and complex scenarios intelligently through context-based decisions. This significantly reducing the need for human intervention in AP processes, redefining procure-to-pay as we know it.

AI Applications in Accounts Payable

  1. Optical Character Recognition (OCR): At the core of digital transformation in for invoice management is OCR technology, which converts text from scanned documents into machine-encoded text, making digital data extraction possible from paper invoices, receipts and more. This technology has been around for some time, but with the advent of generative AI, OCR is becoming more accurate than ever. Output from OCR can be put through a secondary layer of AI processing, to improve accuracy with context-based reasoning, mimicking the ‘human touch’ that OCR sometimes lacked. This layered technology enabled touch-free invoice processing, where an invoice from a supplier can be automatically identified in an email inbox, scanned, the data extracted and uploaded accurately and instantly to your AP system, completely removing manual data input and verification.
  2. Natural Language Processing (NLP): NLP stands out for its ability to interpret and understand human language, enabling natural language interactions with your AP system. Kloo leverages NLP to allow team members to make purchase requests using everyday language, making the process more accessible to non-finance personnel. Kloo also uses NLP in our ‘AP Analytics’ reporting module, allowing for intuitive data querying in your own words. The key benefit of NLP is accessibility and user experience, making previously time-consuming tasks like data analysis, or filling a spend requisition form intuitive and conversational. In a function like AP that includes team members from across an organisation, the importance of usability in AP cannot be overstated.
  3. AI for Invoice Matching: Kloo uses AI’s contextual reasoning to power 2- and 3-way invoice matching. Imagine a situation where a purchase order lists the supplier’s full name, but the invoice uses a shortened version. Traditional systems might stumble over this discrepancy, often needing a human to step in and use context to figure it out. Kloo’s AI, however, is designed to navigate these nuances by understanding the context, enabling it to accurately match invoices that might otherwise slip through the cracks of more conventional systems

The Impact of AI in Accounts Payable

User Experience

In a comprehensive procure-to-pay (P2P) system, the involvement isn’t limited to the finance team; it extends across the organisation, necessitating a collaborative effort for AP success. Ensuring that the system is intuitive, quick, and user-friendly is crucial to preventing bottlenecks and enhancing overall efficiency. When tasks are streamlined and pleasant to engage with, individuals are more likely to complete them promptly. The implementation of natural language processing (NLP) and interfaces that understand everyday language is central to crafting this intuitive UX, making it easier for users to, for example, submit purchase requests in their own words, without a lengthy form.

Strategic AP

The reduction of manual tasks through AI not only streamlines processes but also frees up valuable time for finance teams. This newfound time can be redirected towards more strategic endeavours such as forecasting, refining procurement strategies, and enhancing fraud prevention measures. By automating routine tasks, AI allows finance professionals to focus on areas that require their expertise and strategic thinking, ultimately contributing to the organisation’s growth and financial health.

Supplier Relationship Health

Furthermore, AI’s role in AP extends to improving supplier relations. By accelerating the invoice processing cycle, AI significantly reduces the time between invoicing and payment, helping organisations avoid late payment penalties. This efficiency fosters stronger, more strategic relationships with suppliers, as it demonstrates reliability and respect for their payment terms. In this way, AI not only optimises internal processes but also contributes to building a solid external network, which is crucial for any business’s sustainability and success.

A Vision for the Future: Strategic AP Teams Empowered by AILooking ahead, the integration of AI into accounts payable presents a promising future for financial operations. As AI technologies continue to evolve, we can anticipate even more intuitive and intelligent systems that further streamline AP processes. The goal is to create a seamless experience where manual intervention becomes the exception, not the rule, allowing finance teams to focus their expertise on strategic planning and analysis.

Key Takeaways

The integration of AI is redefining the role of AP in organisations. By automating tasks that were once manual and error-prone, AI is freeing up AP teams to focus on more strategic aspects of finance. This move towards automation is particularly crucial in the procure-to-pay process, which benefits from collaboration across various departments, not just the finance team. The result is a smoother, more efficient workflow that enhances the overall user experience, making financial tasks quicker, more intuitive, and less of a chore. With the time saved from manual processes, teams can now delve into forecasting, procurement strategies, and fraud prevention with greater depth. This shift not only bolsters the financial health of an organisation but also positions the AP team as a key player in driving business growth and sustainability.

Interesting in seeing an AI-powered AP system in action? See Kloo’s product tour here