While AI is a hot topic for companies, it can also be difficult to picture what it looks like in practice. And without being able to envision the tangible results of AI, we’re more hesitant to invest in or trust it with our business processes. One practical area in which AI has demonstrated remarkable success is automating accounts payable processes. In this blog post, we’ll look at a real-world example of how we implemented AI for AP automation for a major retailer with over 200 locations, showcasing the transformative power of this technology.
The Problems of Manual Processes in AP
The retailer in question faced a significant challenge: decentralized, outdated purchasing processes across its numerous locations and one AP team struggling to keep up with the constant flow of invoices. Manual processing (on paper!) left little time for the team to validate payments and provided no ability to track invoices through the approval process. The end result? The company encountered frequent errors and late payments and was vulnerable to overpaying on unverified invoices! The absence of a digitized, structured process was no longer a sustainable option.
Crafting the AI-Powered Solution
Our approach involved using AI-driven AP automation to digitize and streamline the entire invoice processing workflow:
- Data Extraction: Implementing advanced OCR (Optical Character Recognition) technology to accurately extract data from both electronic PDFs and scanned paper documents.
- Automated 3-Way Match: Integrating the system with the retailer's ERP (Enterprise Resource Planning) to automate the reconciliation process by matching purchase orders, inventory receipts, and vendor invoices. Any discrepancies are flagged for review, ensuring accuracy and preventing erroneous payments.
- Automated Routing: Developing a dynamic routing system that automatically directs invoices requiring review to the appropriate stakeholders via email, accompanied by prepopulated explanations for the discrepancies identified.
- Automated Posting: Upon successful completion of the 3-way match or receipt of electronic approval, invoices are seamlessly posted to the AP module in the accounting system. Invoices failing to meet the criteria are withheld from processing until discrepancies are resolved.
Realizing the Results
The implementation of AI-powered AP automation yielded great outcomes for the client:
- Efficiency Gains: Elimination of paper-based processes and manual data entry significantly reduced processing time, freeing up valuable resources within the AP team.
- Cost Savings: The introduction of automated 3-way match controls led to an estimated 5-10% reduction in inventory purchase costs, translating to annual savings of $5M-$10M.
- Enhanced Visibility: Improved tracking and visibility into the invoice approval process facilitated proactive management of outstanding invoices, ensuring timely processing and minimizing late payments.
- Focus on Value-Added Tasks: With routine tasks automated, the AP team could redirect their efforts towards strategic initiatives, such as optimizing vendor relationships and enhancing financial forecasting accuracy.
A More Efficient Future with AI-Powered AP Automation
The success of this AI-driven AP automation initiative underscores the huge potential of technology to completely transform traditional business processes. As companies work toward AI maturity, it's crucial to identify areas ready for automation and use innovative solutions to drive operational excellence. At AMEND, we guide organizations through this journey, helping them unlock new efficiencies, reduce costs, and stay ahead in an increasingly competitive landscape.
If you want to explore the possibilities of AI automation for your business or need guidance on navigating the complexities of digital transformation, we're ready to help. Reach out to us today and let's start this exciting journey together!
