Leveraging AI for AP Payment Processing

In today’s business operations, Accounts Payable (AP) payment processing stands as a critical function for organizations of all sizes. The efficient management of AP processes not only ensures timely payments to vendors, but also impacts cash flow, financial forecasting, and overall business performance. However, traditional AP payment processing methods often suffer from inefficiencies, errors, and time-consuming manual tasks.

The Current State of AP Payment Processing

Surprisingly, many organizations still use a manual approach to manage invoices and process payments. This means a lot of time-consuming and unfulfilling work shuffling paper, cutting checks, and mailing payments. In a 2023 State of Payment Operations report from Modern Treasury, leaders surveyed described their current payment operations as “complicated, slow, and inefficient,” and eight in 10 decision makers reported that up to half of their payment operations are done manually.

The same report also found that most accounting teams use upwards of 6 (yes, 6!) systems to manage payment operations. This alone poses complicated challenges around technical integrations, process oversight, and system maintenance.

Errors are also a big issue that cause time and resource drain in AP. A recent CFODive.com article references Gartner survey findings that nearly three out of five accountants (59%) make several errors every month as already excessive workloads grow heavier still.

As organizations grapple with these complexities of AP payment processing, they are plagued with bottlenecks that ultimately cause longer and longer payment cycles. The manual data entry, invoice discrepancies, system management, and cumbersome approval workflows also lead to increased operational costs, hinder decision-making, and strain relationships with vendors.

Leveraging AI in AP Payment Processing

Fortunately, advancements in artificial intelligence (AI) present a transformative solution to streamline AP payment processing. By harnessing the power of AI algorithms, organizations can automate data entry, enhance accuracy, detect fraud, and make informed decisions with predictive analytics. Moreover, AI enables personalized payment approaches tailored to the unique needs of each vendor, fostering stronger partnerships and driving operational efficiency.

A Google survey found that approximately 40% of executives said there is an urgent necessity to adopt generative artificial intelligence (AI). Automation and AI have become essential tools in the B2B landscape to transform financial operations and payment processes, according to PYMNTS.com.  

More specifically, according to a recent PYMNTS survey, approximately 90% of companies expressed that implementing automation for their AP systems could enhance payment visibility and transparency, leading to a reduction in errors, and 98% of respondents believed that AP automation had the potential to accelerate the overall speed of their payments.

Business leaders are embracing the use of AI more and more. Tom Randklev, the global head of product at Cellpoint Digital told PYMNTS that “Generative AI can essentially retrain the old AI and machine learning models,” and sees “a really interesting trajectory [for AI] when it comes to payments.”

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Key Technologies Driving AI in AP Payment Processing

Defining and understanding the various types of automation and AI technologies can be challenging. The industry continues to evolve, and grasping how each type works can be overwhelming — however, there are some simple ways to explain the differences. 

Machine learning algorithms lie at the heart of AI-driven AP payment processing, enabling systems to learn from historical data and optimize processes over time. Natural language processing (NLP) further enhances the capabilities of AI systems by enabling them to interpret and extract valuable insights from unstructured data such as invoices and contracts. Robotic process automation (RPA) complements AI by automating repetitive tasks, freeing up human resources to focus on higher-value activities. Additionally, the integration of blockchain technology ensures secure and transparent transactions, mitigating the risk of fraud and enhancing trust in the payment process.

Benefits of Using AI in AP Payment Processing

While various technologies can improve the automation of payment processing, AI enables AP autonomy — the ability for the AI to process data independently, analyze data, and make real-time decisions and actions based on that data. This is a trending - and revolutionary — way to rethink AP payment processing overall and change the industry’s approach. Beyond time and cost savings, AI can improve B2B payments by: 

1. Streamlining invoice processing with computer vision and AI to extract and understand text from invoices, classify that data, and route for approval without any data entry or review.

2. Creating faster approval workflows with automatic routing for prompt reviews and approvals, and once the AI reaches a high enough confidence level on common invoice payments and patterns, approval is automatic and payments are processed immediately - without human intervention.

3. Efficiently scheduling and sending payments through integration with payment systems and gateways for electronic payments, such as ACH transfers or virtual card payments. 

4. Surfacing early payment discount opportunities by reading and classifying invoices in real-time, providing better cash flow management, more payment controls, and visibility.

5. Reducing costs and improving vendor relationships with instant detection of invoice discrepancies.

Viable Solutions for Implementing AI in AP Payment Processing

Several technology companies are delivering AI solutions to help finance professionals realize significant benefits in their AP payment processing workflows. For instance, Vic.ai provides autonomous AI technology for an end-to-end accounts payable process. The AI-first platform works alongside a traditional ERP as a collaborative AI partner to ingest, process, approve and pay invoices — without human intervention. This vastly reduces processing times and eliminates errors, while also offering increased payment accuracy and security. The additional abilities to process various payment types and surface early payment discounts helps finance teams optimize cash flow and have better visibility across the invoice process.

Overcoming Challenges and Adoption Barriers

In the recent Ernst & Young 2023 Financial Services GenAI Survey, the majority of respondents “felt positive about AI, with more than half (55%) saying they felt supportive and optimistic about using AI in their organization.” 

While this is a positive sentiment for AI in the financial industry and there are many promising benefits for using AI in AP payment processing, organizations may face some challenges and adoption barriers. 

Data security and privacy concerns remain paramount, requiring robust measures to safeguard sensitive financial information. Integration with existing systems poses another challenge, necessitating seamless interoperability between AI solutions and legacy infrastructure. Moreover, employee training and change management efforts are crucial to ensuring smooth transitions and maximizing the benefits of AI adoption. Additionally, regulatory compliance considerations must be addressed to adhere to industry standards and legal requirements.

Finance and accounting professionals need to be well-educated and equipped to champion AI technology within their organizations, with AI adoption and execution strategies in-hand. Understanding how to adopt AI in a secure and trustworthy way and carefully selecting an AI vendor tailored for the AP space are critical. 

Vic.ai, for example, is one vendor that is AI from the ground-up, and pushing the boundaries on what AI can do for autonomous invoice processing and payments. 

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Future Trends and Opportunities

AI will continue to disrupt the business landscape, and how an organization implements and leverages AI will impact their future growth. According to a 2023 IDC Infobrief, global spending on AI is to exceed $301 billion by 2026. 

For AP payment processing with AI specifically, the future looks promising. Continued advancements in AI and machine learning technologies will further optimize AP processes, driving greater efficiency and accuracy. And the integration of AI with blockchain holds the potential to revolutionize payment systems, offering unparalleled security and transparency. Emerging solutions are also offering AI-powered capabilities for corporate cards and spend management within AP platforms, further streamlining the financial function.

By automating tasks, enhancing accuracy, and enabling informed decision-making, AI empowers organizations to streamline AP processes, optimize cash flow, and foster stronger vendor relationships. As businesses navigate the complexities of AI adoption, addressing challenges and leveraging emerging technologies will be key to unlocking the full potential of AI in AP payment processing.