Nowadays, Artificial Intelligence (AI) has been simplifying our lives. From “Ok Google” to Alexa chatbots, the AI is making everything easier, smarter and quicker.
When it comes to business, Artificial Intelligence has influenced many of its facets by automating many of the processes involved. Thankfully, billing and invoice processing, one of the most burdensome and complicated tasks in business, has seen some major changes since the introduction of AI.
In that order, Artificial Intelligence has revolutionized the traditional way of billing and invoicing. Applying AI to accounting has huge potential as it can reduce a lot of calculations and manual operations.
Artificial Intelligence and Invoice Processing
Every company needs invoices to function correctly and any update to the workflow in this area can have a significant impact. Artificial Intelligence has the potential to create new experiences, revolutionize billing automation, and finance management.
The first issue in question is the fact that digital bookkeeping doesn’t equal automation and efficiency. If the only difference between your current accounting practices and that of a company from the fifties is that you have replaced pen and paper with a computer, your organization still belongs in the last century. There are better ways to take care of this business aspect, and it includes AI development.
From paper to artificial intelligence
Mainly, the receiving company process and prepare all related to invoices, manually or semi-automatically. Artificial Intelligence can impact this process in three ways: digitizing the underlying documents and producing the invoice, extracting data, and filling in data.
Here we explain how this process works, according to the 3 points of impact described above.
1. Invoice OCR
When an invoice is received, if it’s on paper, it must be scanned and introduced into the digital system. If it was already digital, then it is passed on to the analyzer. Regardless of the document’s format (PDF or image), the first step is optical character recognition. Artificial Intelligence can help in this case because the task relies on finding patterns.
In the case of intelligent invoice processing, the OCR should be fine-tuned to identify not only the letters and numbers but the main structure of the invoice. Header, usually including the sender’s identification data, and the footer, where safety elements are present.
Not all invoices are equal. Therefore, the software must be able to mimic the human skills of recognizing mandatory fields correctly and any other information which might be relevant.
In that sense, when using Artificial Intelligence for automatize invoices, it is necessary that the software has sufficient historical data to learn from.
This means that the AI need having past invoices to use as examples in order to configure the algorithm according tu the system needs. The challenges are mostly related to the fact that not all vendors use the same data fields and not even the same names for designating the corresponding data fields.
2. Data extraction
Once the invoice is in a legible form, the algorithm extracts and validates the data fields. Depending on the accuracy of the OCR, this step might need further validation from a person or an embedded cross-checking tool. In bookkeeping, any error can lead to a snowball effect of error propagation.
In an ideal setting, there would be no need for human intervention, but since there is no general rule of how an invoice should look and OCR is prone to errors, especially in the case of non-standard invoices, such as those from foreign business partners, it helps to have a CPA supervise the process.
Invoice number, Gross amount, Net amount, Tax percentage, Purchase order number, etc…
For each supplier invoice, the self-learning software creates a template-model automatically. This substitutes the manual model creation. Employees do not set up or optimize templates, the software does it in one second. With My T App, you save template set-up time and maintenance costs.
3. Invoice Generation
Processing received invoices can optimize a lot in the accounting process. Although, in the best case scenario, the entire activity is automated, including invoice generation. Right now, most companies use a semi-automated solution for electronic invoicing based on XML schemas or Excel macros.
Artificial Intelligence can take this a step further and complete at least some of the fields in the invoice, starting with general information such as the company’s details, cost center, tax codes, amounts and more. If the vendor and the buyer have integrated systems, this can be done easier.
However, even the best system doesn’t put the accountant out of their job, since they need to validate the invoices before sending or registering them.
Artificial Intelligence for Data Completion
The ultimate goal of digitalization is to automate the full invoice processing workflow. Separation and data extraction is the first and second step. Even if you receive an E-invoice, consisting of all invoice data in the XML-structure, every company needs to “complete” the invoice with the appropriate accounting attributes. To date, accountants use their accounting knowledge to assign these attributes manually or search for it. Here, new technologies emerged to automate this process using artificial intelligence. My T App completes each invoice with the following information:
- General ledger
- Cost center
- Tax codes
Now the accountant uses accounting knowledge to carry out checks, especially to check soft criteria and circumstances. In addition, My T App highlights any deviations from the past automatically for manual transactions. Speaking in AI terms, this is a “classification” exercise. Data from journals and historical invoices are used to train classifiers, individually for each business partner.
Benefits of Artificial Intelligence powered Invoice Processing
- Faster Invoice Processing: Consider that, for one invoice, manual data extraction took over three and a half minutes, while AI-enabled extraction took just under 27 seconds. Future invoices from the same supplier will require even less time to process, as the platform now recognizes it and no longer requires human validation. The solution gets smarter with every new invoice it processes; therefore, our example company will eventually have the option of fully automated invoice processing.
- Enhanced Data Accuracy: Artificial Intelligence and Machine Learning detects and captures invoice data using neural networks to increase its understanding and capabilities with every document it processes. Unlike a human data entry clerk, smart invoice processing software does not come with the risk of making errors due to, for instance, the fatigue of carrying out a dull repetitive task.
- Increased Productivity: With Artificial Intelligence & Machine Learning taking care of the manual tasks, your Accounts Payable team can shift their focus on value-generating activities, such as:
- Financial planning
- Tracking company spend
- Deriving actionable insights from analytics
- Collaborating with other corporate functions, such as Procurement
- Strengthening vendor-customer relationships
- Improving Bottom-Line: Greater financial impact is seen with on-time invoice approval leading to early payment discounts from suppliers, increasing profit margins.
Artificial Intelligence makes it easier to detect and prevent invoice frauds
Frauds always happen when money is in the center. So it’s obvious that fraudsters also target business enterprises. There are many ways to detect fraud. Nevertheless, Artificial Intelligence powered billing software, you can go one step ahead and prevent fraud from occurring in the first place. Instead of being reactive, you can approach scams in a proactive way.
Artificial Intelligence can check customer information, payment details, invoice details, and other relevant data before initiating a payment.
Moreover, Artifical Intelligence can learn from looking at historical data of both valid and fraudulent invoices. And it can make decisions whether to commence the payment procedure or mark it for review. This could prove to be an effective way of preventing invoice fraud.
Current Challenges in Invoice Processing
Multiple invoice data points leading to errors: Large organizations receive invoices from multiple suppliers through multiple channels as structured XML documents from Electronic Data Interchange (EDI), PDFs and image files via email and increasingly rarely as hard copy documents. It takes a lot of time and manual effort to have all these different types of invoices into the unified system. The error-prone data entry happening at the start of the invoice processing workflow can further lead to possible mistakes such as paying the same invoice twice, paying incorrect amounts, duplication of invoices, etc.
Data mismatch: The accounts payable team has to perform two-way or three-way invoice data matching with a purchase order (PO), goods received note (GRN), and contracts data using “stare and compare”.
Even the most careful human eye cannot guarantee the accuracy. As the team might miss dates, values, or formulas that can ultimately slow down the entire department, lead to overpayments and expose the organization to a variety of risks.
Cost per invoice processing: The ongoing invoice processing process is largely manual with various costs involved like: manual hours, paper, postage, and others putting the real price of manual invoice processing between $12 and $30 per invoice. Apart from this, there are also other hidden costs, like missed early payment discounts, late fees, and accounting errors.
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Our Artificial Intelligence (AI) algorithm takes care of data entry automatically. Which saves you manual labor required to do so, allowing your business to expand.
Know all of our features: Artificial Intelligence backed data extraction. Professional invoice creator. Invoice, bill and receipt management tools. Client and accountant base management tools. Automatic and manual mileage tracking. Dedicated storage space for client data.
My T App is committed to help customers keep digital record of their company in a simple way. Therefore, customers will have all their bookkeeping records in one place to comply with Making Tax Digital.
With help of My T app you will have instant access to all the financial data about your company.
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