How AI Invoice Processing Powers AI Invoice Automation

Digital transformation and artificial intelligence play significant roles in streamlining and improving invoice processing for accounts payable. AI invoice processing and automation help finance teams streamline accounts payable workflows, enabling businesses to use AI for more efficient invoice data extraction, verification, approval, and payment. They reduce invoice processing costs, prevent fraudulent payments through validation, and reduce payment errors.

Invoice processing costs by best-in-class companies using AI invoice processing are $2.78 per single supplier invoice, compared to $12.88 for all other companies surveyed in Ardent Partners’ report, The State of ePayables 2024. According to the same study, the time to process a single invoice is 3.1 days, compared to 17.4 days without AI.

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 at the header and line-item levels with smart OCR. It verifies invoices and flags discrepancies, matches invoices to purchase orders and receipts, automatically codes GL accounts, predicts approvers, and makes payments.

AI for invoice processing automates error-prone manual tasks, such as data entry and document processing. Instead, it enables a paperless accounts payable system that uses an AI-powered, integrated app for invoice processing.

How AI Agents Improve Invoice Processing

AI agents improve invoice processing by autonomously routing invoices to the correct workflows and applying the appropriate GL accounts, cost centers, and tax codes. This reduces manual work, improves coding accuracy, and speeds up invoice processing.

They also resolve exceptions by identifying issues such as duplicate invoices, missing purchase orders, or pricing mismatches and recommending or taking corrective action. AI agents orchestrate approvals by routing invoices to the right approvers, escalating delays, and keeping workflows moving with minimal human intervention.

AI Invoice Processing vs. AI Invoice Automation

While these terms are often used interchangeably, understanding the distinction is important for evaluating financial technology. AI invoice processing focuses primarily on the data transformation layer. This includes invoice capture, data extraction, validation, and document matching to ensure the information is mathematically and factually correct.

AI invoice automation, on the other hand, spans the entire AP workflow. It acts as the orchestration layer that utilizes the processed data. This encompasses automated invoice approvals, dynamic routing, exception handling, payment execution, and final ERP reconciliation. Processing handles the data, while automation manages the entire lifecycle of the payable.

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. It flags discrepancies, guides invoice approvals, and automates the payment of global supplier invoices using AI in automated invoice processing.

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

Optical character recognition (OCR), machine learning (ML), and natural language processing (NLP) are AI techniques used for invoice processing. NLP encompasses the generative AI large language model (LLM) known as ChatGPT. Machine learning, a subset of AI, includes regression, decision trees, and probabilistic classification.

Deep learning is a type of machine learning that uses multilayer neural networks and algorithms that learn rules for processing unstructured data. Documents, images, and text are examples of unstructured data in machine learning and artificial intelligence.

Handling Edge Cases and Exceptions

Tipalti’s AI invoice processing solution is designed to handle edge cases and exceptions, including mismatched POs or receiving reports, non-PO invoices, incomplete invoices, and handwritten or poorly scanned invoices.

Mismatched POs or Receiving Reports 

Tipalti allows your company to set flexible tolerance levels for purchase order and invoice matching, as well as for receiving report mismatches. A visual representation shows a color-coded exception follow-up range, from ‘no approval required’ (green) to ‘approval required’ (yellow) and ‘unapprovable’ (red). This process reduces or automates the number of follow-up events required, saving staff time and driving toward touchless invoice processing.

The designated approver handles an exception marked as ‘approval required’ by responding to an automated email notification, which provides a choice to approve or contest the exception. If the exception exceeds the tolerance level, accounts payable will dispute the bill with the supplier or request an approved PO adjustment in the ERP system.

In exception handling for incomplete invoices, Tipalti AP automation uses AI and automated PO matching to flag exceptions, place payments on hold, and automatically notify the responsible parties. This ensures issues are resolved before a payment is released.

Non-PO Invoices and Illegible Documents 

Tipalti’s Invoice Capture Agent can also handle non-PO invoices by extracting data from emails or supplier portals in various formats. In the case of illegible invoices (handwritten or badly scanned) and incomplete invoices, Tipalti AI automatically routes them to an exception management queue for human-in-the-loop review by Tipalti’s managed services team.

Invoice Data Capture Using AI

AI invoice processing uses intelligent OCR to automatically extract supplier invoice data from an emailed or uploaded invoice file. It instantly converts it into a machine-readable format.

Automated invoice data capture is performed using OCR enhanced with machine learning to improve accuracy. Machine learning starts with training on test data and improves results with subsequent data.

Information extracted from invoices during data capture includes the invoice number, date, and due date. It also captures the purchase order number, vendor contact information, invoice payment terms, line-item part numbers, descriptions, quantities, unit prices, extended price total, sales tax, and amount due.

AI Invoice Processing and Automation Workflows for Accounts Payable

AI-based invoice processing streamlines accounts payable process workflows, beginning with the capture of supplier invoice data. It will extract data for invoice verification, 3-way or 2-way matching, approval, and global electronic payments in large batches with minimal human intervention.

AP workflow automation with AI syncs with your ERP system and automatically reconciles to the general ledger in real time. With best practices, AI-enhanced accounts payable automation provides guided self-service supplier onboarding and automated communications for invoice receipt and payment status. It also delivers automatic supplier tax compliance reports and global regulatory compliance reports.

Applications of AI for Invoice Processing

AI invoice processing has numerous applications, including receiving, verifying, matching, approving, and paying supplier invoices digitally. It also performs AI-driven accounting for accounts payable. Applications include these use cases:

• OCR invoice capture with data extraction: Invoice formats vary across suppliers and are unstructured documents. AI invoice processing can leverage digitized data to perform additional automated invoice-processing steps.
• Automating general ledger coding: AI invoice processing uses generative AI to automate invoice coding, increasing efficiency and reducing manual work. 
• Identifying invoice vs. purchase order coding discrepancies: AI/machine learning-based invoice processing identifies and flags PO discrepancies that require follow-up.
• Preventing duplicate invoice payments: Businesses can save money by enhancing payment controls with AI, alerting accounts payable staff to duplicate invoices and preventing suppliers from being paid twice.
• Predicting invoice approvers for automated routing: AI reduces the manual effort of determining which approvers to assign to each invoice, enabling automated approvals.
• Validating supplier tax forms and withholding: AI validation reduces fraud and improves tax compliance by enabling payers to accurately complete IRS tax forms such as 1099-MISC, 1099-NEC, and 1042-S. TIN accuracy will help ensure your company avoids IRS penalties.
• Chatbot/Digital Assistant for Business Intelligence: Embedding generative AI in AP automation software enables users to analyze their spend and ask questions to receive answers, improving spend management.

Benefits of AI-Based Invoice Processing

AP automation shortens the time required to complete AI-assisted invoice processing after procurement. 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 paper document processing for the AP team, thereby increasing efficiency. It improves cash flow by leveraging AI to detect discrepancies and duplicate payments, preventing overpayments to vendors.

Automated invoice workflows enable your business to avoid time-consuming reliance on Microsoft Excel or Google Sheets for reconciliation. These can contain unintended human errors, delaying the monthly financial close.

Your company is processing supplier and vendor invoices faster than with 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 invoices entering the AP system more quickly, your company gains real-time visibility into its spending.

AI in Invoice Automation: Best Practices

Best practices in AI-powered invoice automation include:

• Change management: prepare your employees for system implementation with top-level support.
• Training AP staff and suppliers: training employees and utilizing supplier enablement enhances implementation and usage outcomes.
• Define SLAs for vendors: obtain an SLA agreement from the AI invoice automation solution that covers system uptime and the expected vendor payment timeframe.
• Set thresholds for auto-approval to reduce staff follow-up time by defining allowable tolerances, avoiding unnecessary exceptions, and enabling touchless AP workflows.
• Data governance includes high data security, audit trails, role-based access, supplier data validation, automated global regulatory compliance, and data syncing with the ERP.

Organizations that employ best practices may achieve an invoice processing cost per invoice of approximately $2.75 to $5.00, which approximates published best-in-class study results. 

Tipalti’s invoice processing and payment calculator lets you calculate your company’s cost per invoice.

What Finance Leaders Should Know

AI invoice processing improves efficiency, but it isn’t infallible. Finance leaders should require human review for low-confidence results, high-value invoices, policy exceptions, and unusual transactions while using approval thresholds to automate routine processing.

Strong governance is equally important. Set confidence score thresholds, maintain audit trails, enforce role-based access, and use AI to detect duplicate invoices, fraud risks, and suspicious payment activity while keeping humans responsible for final oversight.

How to Implement AI in Your Invoice Processing Workflows

To implement best practices for AI in accounts payable, integrate your ERP or accounting system with an AP automation add-on via an API or CSV file, mapping fields and syncing data.

AP automation is an AI solution for invoice processing. It incorporates artificial intelligence, including OCR, unstructured machine learning, generative AI, and RPA (robotic process automation) for automating routine tasks.

AP automation uses natural language processing AI for business intelligence. It may provide an AI digital assistant for queries and analysis, as well as leveraging other AI technologies.

Tipalti optionally offers Implementation Services for AP automation to let 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 Accounts Payable for AI Invoice Processing

Tipalti Accounts Payable seamlessly integrates and syncs with your ERP or accounting system. If your ERP system has multi-entity and real-time capabilities, Tipalti handles accounts payable by entity, providing a combined view and real-time visibility into spending and cash flow requirements.

The platform handles end-to-end finance AI, including machine-learning invoice processing, for accounts payable workflows. Tipalti AP automation provides a Supplier Hub for guided self-service supplier onboarding and automated supplier validation, reducing vendor inquiries.

Tipalti AI Agents 

Tipalti AI, within its AP automation, uses advanced artificial intelligence to elevate finance teams beyond generic OCR. Tipalti AI Agents autonomously handle routine tasks to ensure financial control.

This includes autonomous exception handling and approval routing, leveraging the Bill Approvers Agent to dynamically navigate bottlenecks. Tipalti initiates invoice processing with its Invoice Capture Agent and performs intelligent GL coding with its Invoice Coding Agent.

For security, Tipalti applies over 26,000 global payment rules to validate data and eliminate errors, while Tipalti Detect® provides dedicated fraud detection through network analysis and sanctions screening.

Finally, the Tipalti AI Assistant and Reporting Agent uncover real-time spending insights and automate reporting for your team by enabling you to instantly create custom reports using natural language. 

To see how these agents transform workflows, explore Tipalti Finance AI.

Take Invoice Processing Further with Tipalti AI

If your company is performing manual invoice processing steps without AI, it’s spending too much time, making unnecessary payment errors, and constantly hiring to keep up with the increasing volume of invoices. Instead, with Tipalti’s scalable solution, your company will pay its supplier invoices more efficiently and reduce costly 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, and gain real-time spend visibility. Streamline accounts payable with AI invoice automation. Tipalti’s AI Assistant and AI Agents handle exceptions, flag fraud, and accelerate approvals—so your team can focus on what matters most.