Ultimate Guide to AI Invoice Processing

Digital transformation and artificial intelligence play significant roles in streamlining and improving invoice processing for accounts payable. With AI invoice processing via AP automation, businesses use AI for more efficient invoice data extraction, verification, approval, and payment. They reduce invoice processing costs, avoid paying fraudulent suppliers through validation, and make fewer payment errors. 

In 2024, “35% of global companies use AI and approximately half of businesses plan on incorporating AI into their processes this year,” according to Exploding Topics, a resource for communicating and predicting business trends.

Learn about intelligent invoice processing that uses artificial intelligence and its machine learning component. Understand AI invoice processing, including use cases, AI tools, automated accounts payable solutions, and benefits. 

What is AI Invoice Processing?

AI invoice processing uses artificial intelligence/machine learning and automation to capture supplier invoice data by header and line items with smart OCR, verify invoices and flag discrepancies, match invoices to purchase orders and receipts, automatically code GL accounts, predict approvers, and make payments. 

AI for invoice processing eliminates error-prone manual tasks for data entry and document processing. Instead, it enables a paperless accounts payable system that uses AI-powered automation software as an invoice processing solution.

How Does AI for Invoice Processing Work?

AP automation with AI invoice processing reviews and matches captured digital invoice data with purchase orders and receiving data. The software flags discrepancies, guides invoice approvals, and automates paying global supplier invoices by using AI in automated invoice processing. 

AI for invoice processing integrates AP automation software (using AI technology) with your ERP system or accounting software to streamline and automate accounts payable workflows and aid in business spend analysis for decision-making and cost control. 

Optical character recognition (OCR), machine learning (ML), and natural language processing (NLP) are types of AI used for invoice processing. NLP includes the generative AI large language model (LLM) called ChatGPT. 

Machine learning, a subset of AI, includes different types of regression, decision trees, and probabilistic classification. Deep learning is a type of machine learning that uses multilayer neural networks with algorithms as rules for unstructured data. Documents, images, and text are examples of unstructured data in machine learning as artificial intelligence. 

Invoice Data Capture using AI

AI invoice processing uses intelligent OCR technology to automatically capture supplier invoice data from an emailed or uploaded invoice document file and instantly convert it to a machine-readable format. 

Automated invoice data capture is performed with OCR that’s enhanced with machine learning technology for experience-improved accuracy. Machine learning starts with training on test data and improves results with subsequent data. 

Information extracted from invoices during data capture includes:

• Invoice number
• Invoice date
• Invoice due date
• Purchase order number
• Vendor contact information and other headers
• Invoice payment terms
• Line item part numbers, descriptions, quantity, unit price, extended price total
• Sales tax
• Amount due

AI Invoice Processing Workflows for Accounts Payable

AI-based invoice processing completes accounts payable process workflows, starting with supplier invoice data capture. It will extract data for performing invoice verification, 3-way or 2-way matching, approval, and global electronic payment in large batches with less human intervention. 

AP automation software with AI syncs with your ERP system and provides automatic real-time reconciliation to the general ledger. 

With best practices, AI-enhanced accounts payable automation software adds guided self-service supplier onboarding, automated invoice receipt and payment status communications, and automatic supplier tax compliance preparation reports and global regulatory compliance. 

Applications of AI for Invoice Processing

AI invoice processing has many applications for digitally receiving, verifying, matching, approving, and paying supplier invoices, as well as performing AI accounting for accounts payable. 

Applications of AI invoice processing include these use cases:

1. OCR invoice capture with data extraction: Invoice capture is an excellent application for machine learning within AI because invoice formats and layouts vary for each supplier as unstructured data documents. AI invoice processing can use the digitized data to complete other automated invoice processing steps. 
2. Automating general ledger coding: AI invoice processing automation includes using embedded ChatGPT generative AI for automating invoice coding to increase efficiency through automation. 
3. Identifying invoice vs. purchase order coding discrepancies: AI/machine learning invoice processing identifies and flags PO discrepancies requiring follow-up. . 
4. Preventing payment of duplicate invoices: Businesses can save money by improving payment controls through AI, including alerting accounts payable staff about duplicate invoices for which the supplier shouldn’t be paid twice. 
5. Predicting invoice approvers for automated routing: AI replaces human judgment in determining which approvers should be used for each invoice approval. 
6. Validating supplier tax forms and withholding: AI validation reduces fraud and improves tax compliance by payers completing 1099-MISC, 1099-NEC, and 1042-S IRS tax forms. TIN (taxpayer identification number) accuracy will ensure that your company avoids IRS penalties when filing its related information returns. 
7. Chatbot/digital assistant for business intelligence: Embedding the ChatGTP large language model or other generative AI in AP automation software lets users analyze their spend and ask questions to receive answers for decision-making and better spend management.

Benefits of AI-Based Invoice Processing

AP automation shortens the time required to complete AI-assisted automated invoice processing after procurement with AI. In addition to reducing processing time, it provides other benefits, including cost savings and better detection of fraud, errors, and duplicate invoice payments. 

Your company achieves cost savings by eliminating manual data entry and processing of paper documents by the AP team for efficiency. It improves cash flow by using AI payment rules to detect discrepancies and duplicate payments that would result in overpaying your vendors or suppliers. 

Automated AI invoice processing workflows let your business avoid using time-consuming Microsoft Excel or Google Sheets as reconciliation spreadsheets that can contain unintended human errors and delay the monthly financial close. 

Your company is processing supplier and vendor invoices sooner than when using manual AP processes. Therefore, your accountants will not need to manually accrue as many accounts payable invoices after the month-end cut-off date to record them in the proper accounting period for the financial statements. 

With quicker entry of invoices into the AP system, your company gets real-time visibility into spending. 

Summary of Benefits from AI Invoice Processing

A summarized list of benefits from AI-based invoice processing is:

1. Increasing efficiency for cost savings and less hiring
2. Reducing human errors, duplicate invoice payments, and costs 
3. Automating intelligent invoice management 
4. Improving security, financial controls, and compliance
5. Reducing fraudulent payment risks 
6. Processing invoices for payment faster, in time to take early payment discounts and avoid late payment fees
7. Automatically routing matched digital invoices for a quick online invoice approval process
8. Improving supplier relationships through better communication and timely payments
9. Providing real-time spend visibility and analysis for better spend management, profitability, and cash management 
10. Freeing more accounting resources for strategic finance initiatives to improve business results
11. Applying best practices through AI-powered digital transformation

AI in Invoice Automation: Best Practices

Organizations using best practices achieve an invoice processing cost per invoice of $5 or less, which is well below the range of $15 to $20 and the average of $12, according to analysts that include Aberdeen Group and Paystream Advisors. Tipalti’s Invoice Processing and Payment Calculator lets you calculate your company’s cost per invoice. 

How to Implement AI in Your Invoice Processing Workflows

To implement best practices for AI in accounts payable to handle your invoice processing workflows, integrate your ERP or accounting software with add-on AP automation software through an API or CSV file integration that maps fields and syncs data between systems. 

AP automation software is an AI solution for invoice processing. It incorporates artificial intelligence, including OCR, unstructured machine learning, generative AI, and RPA technologies for robotic process automation of routine tasks using structured input with logic. 

AP automation uses natural language processing AI for business intelligence. It may provide an AI digital assistant for queries and analysis that embeds ChatGPT for finance and uses other AI technologies. ChatGPT is one of the best and most widely adopted AI tools contributing to the rise of AI.

Tipalti optionally offers Implementation Services for its automation software to let its new customers get a faster start with experienced guidance. To train your suppliers for the efficient onboarding process, Tipalti also offers an optional Supplier Enablement program.

Tipalti AP Automation for AI Invoice Processing

Cloud-based Tipalti AP automation seamlessly integrates and syncs with your ERP system or accounting software. If your ERP system has multi-entity and real-time capabilities, Tipalti handles accounts payable by the entity, with a combined view and gives visibility into real-time spending and cash-flow requirements. 

Tipalti handles end-to-end finance AI with machine learning invoice processing for accounts payable workflows. Tipalti AP automation provides a Supplier Hub for guided self-service supplier onboarding with automated supplier validation. The Supplier Hub collects W-9 and W-8 forms data. It shows invoice and payment history and status to reduce AP inquiries from vendors. 

Tipalti AI℠, within its AP automation software, uses advanced artificial intelligence in all of the processes listed in the AI invoice processing applications section of this guide. Tipalti uses ChatGPT AI for accounting to predict and automate GL invoice coding (and PO coding). 

Tipalti includes guided self-service supplier onboarding, tax compliance preparation and validation, and global regulatory compliance. 

Tipalti begins supplier invoice processing with AI-driven optical character recognition (OCR) for invoices. It uses machine learning to improve accuracy in capturing invoice data. For invoice processing, Tipalti AP automation software applies over 26,000 payment rules to detect discrepancies before your company can make global payments. 

Summing It Up 

If your company is performing manual invoice processing steps without AI invoice processing, it’s spending too much time, making unnecessary payment errors, confining the AP team to the office, and constantly hiring to keep up with increases in invoice volume.

Instead, with scalable and automated AI invoice processing, your company will pay its supplier invoices more efficiently, add financial controls to prevent fraudulent supplier payments, and reduce costly payment errors. 

Your business will improve tax and global regulatory compliance, earn lucrative early payment discounts, get quicker 3-way matching and approvals, code invoices automatically, improve supplier relationships, and gain real-time spend and cash flow visibility. Read the eBook to learn how to optimize finance operations with AI invoice processing.