AI-powered invoice processing: Technologies and use cases
Artificial intelligence (AI) is a transformative technology that can bring multiple tangible benefits to businesses. Companies across finance, retail, healthcare, and other verticals are implementing AI to improve various aspects of their businesses, and invoice processing is one of them.
By adopting custom invoicing software equipped with AI technology, organizations can transform their invoicing workflows, making the process more accurate, smooth, and efficient.
The article covers core AI technologies that can complement a custom invoice processing tool and outlines four particular AI use cases.
What AI technologies can streamline invoice processing?
AI includes several technological sub-branches, each of which can be used by a company to transform the invoicing process:
- Machine learning
Machine learning (ML) enables software systems to learn and improve by processing and analyzing data. ML-powered algorithms can not only perform intelligent tasks such as data clustering, pattern recognition, and forecasting, but also handle them more efficiently with each new iteration.
- Computer vision
Computer vision (CV) enables computer programs to detect and classify visual information. Optical character recognition (OCR) and intelligent character recognition (ICR) are key CV sub-fields that focus on identifying characters in typed and handwritten text, respectively.
- Natural language processing
Natural language processing (NLP) is used for analyzing and interpreting human speech. NLP-powered computer algorithms can also generate text and transform it into human-like speech.
How can AI be applied to invoice processing?
Here are some practical AI applications for invoice processing:
- Autonomous invoice processing
Companies can augment their invoice software with AI-enabled advanced automation capabilities. Unlike traditional rule-based automation, which requires human supervision, AI algorithms can perform invoice data extraction, validation, matching, and other tasks with little to no human involvement.
Specifically, AI algorithms can scan invoices from multiple sources, such as business emails or chats. They can also process invoice documents in various formats, including Excel spreadsheets, PDF files, scanned docs, or images.
An invoice processing solution can also automatically extract data from these invoices, including vendor or client names, invoice numbers, or financial values. Then, ML algorithms can automatically analyze this data to determine a type of invoice and classify it as a sales, purchase, or tax invoice, one-time or recurring, etc.
At the same time, algorithms can detect discrepancies and duplicate payments (for instance, by matching invoice data with purchase order data from the ERP system). The software can then forward the invoice to the appropriate department or employee for review. Alternatively, the AI algorithm can automatically register an invoice and submit it for payment.
- Fraud detection
As mentioned earlier, AI algorithms can validate invoice data and thus ensure the accuracy of future transactions. They can also identify fraudulent activity and, therefore, help a company avoid invoice scammers.
AI algorithms analyze vast amounts of historical information, including invoice, transaction, and supplier data, to determine legitimate and valid invoices. Any deviations, such as a sudden influx of invoices or invoices from an unusual email address, can signal fraud.
If some deviation is detected, the AI algorithm can block payments on a suspicious invoice or alert security risk specialists to initiate an investigation. Thus, an AI-powered invoicing solution can prevent fraud before it occurs, potentially saving a company tens or even hundreds of thousands of dollars.
28% respondents to Nvidia’s report State of AI in Financial Services: 2024 Trends are investing in AI adoption to detect payment and transaction fraud, making it one of the most popular AI use cases in finances (along with risk management and portfolio optimization). 51% of AI adopters say the technology helps address fraud detection challenges, according to the same report.
- Cash flow forecasting
Efficient financial management requires accurate cash flow analysis and forecasting. When complemented with AI capabilities, an invoicing solution can help a company generate precise cash flow forecasts based on historical invoice and payment data analysis. This way, the company can improve the accuracy of financial planning, which in turn helps allocate resources more efficiently.
In addition, the automation of cash flow forecasting via AI allows companies to free up employees’ work time, which can be allocated to other critical activities. JPMorgan’s AI cash flow forecasting tool launched in 2023 has already helped 2,500 corporate clients reduce manual work by almost 90%.
- Audit automation
Effective financial control and management in a company are difficult without regular and accurate internal financial audits. Such audits allow decision-makers to track the company’s profit and expenses, and analyze the organization’s cash flow movements, which helps determine growth dynamics and identify weaknesses in financial management.
However, financial audits are rather complex and inefficient if performed manually. Collecting and processing the data required for an audit is one of the most time-consuming aspects of this activity, and AI can help a company optimize it.
In particular, AI can extract and merge the necessary invoice documents from across different data repositories, thus allowing human auditors to avoid this routine duty. AI software can also scan large sets of invoice information, identify anomalies, and flag problematic data, saving auditors work time and helping them focus on reasoning and auditing itself.
Final thoughts
AI is transforming many aspects of modern business, and invoice processing is no exception. Autonomous invoice processing, fraud detection, cash flow forecasting, and audit automation are just a few examples of how AI can be applied to invoice processing.
By implementing invoicing software with AI capabilities, companies can ensure a smoother and faster invoicing process, reduce errors in accounting data, and increase customer or partner experience.
