Mastering AP Automation: Avoid Common Pitfalls with Expert Insights

Artificial intelligence (AI) has emerged as a game-changer in accounts payable (AP) automation, promising to revolutionize how finance professionals handle repetitive tasks and enhance decision-making processes. However, as with any transformative technology, there are potential pitfalls. In our recent webinar, Avoiding AP Automation Pitfalls: How to Choose AI Solutions Wisely, hosted by IOFM and sponsored by Vic.ai, industry experts shared invaluable insights on harnessing AI effectively while avoiding common missteps.

Mark Fisher, Senior Vice President of Marketing at Vic.ai, was joined by Mark Brousseau of Brousseau and Associates, a well-known industry thought leader in the AP space, and Russ Mohr, Senior Director of Sales Engineering, also of Vic.ai.

The current state of AP automation

The persistence of manual processes in AP departments contributes to inefficiencies.

Despite the widespread adoption of some form of AP automation — 77 percent of AP departments, according to an IOFM study — 68 percent still have to handle most of their invoices manually. This disconnect underscores the need for more advanced, AI-driven solutions to fully automate and streamline AP tasks,” says Fisher. 

A hybrid approach to invoice processing means there may be some level of automation, such as image capture, document scanning, or automated routing. However, the AP manager may still do manual data entry or invoice validation. This is time-consuming and error-prone, leading to increased operational costs and delayed payments. Additionally, the reliance on paper-based processes limits broader visibility into invoice statuses, making it difficult to track and manage cash flow effectively. These automation challenges highlight the importance of adopting comprehensive AI solutions to address common pain points and drive significant improvements in AP performance.

The difference between OCR and AI

It is important to understand the critical differences between traditional optical character recognition (OCR) systems and modern AI technologies. While OCR relies on rules-based logic to locate specific information on documents, it often falters when vendors change their invoice formats. 

"AI uses computer vision and machine learning to understand and process documents dynamically, significantly improving accuracy and adaptability compared to traditional OCR systems," says Mohr.

Traditional OCR systems are limited by their reliance on predefined templates and rules. When an invoice format changes, the OCR system often requires reprogramming to recognize and extract the necessary data. This limitation not only increases maintenance costs but also results in processing delays. In contrast, AI-driven solutions leverage machine learning algorithms that continuously learn and adapt to new formats and variations. This capability enables AI to process invoices more accurately and efficiently, reducing the need for manual intervention and corrections.

Moreover, AI technologies can analyze and interpret contextual information, allowing them to handle complex documents and unstructured data more effectively. By understanding the relationships between different data points on an invoice, AI can ensure more accurate data extraction and validation, ultimately enhancing the overall quality of the AP process.

The ROI of AI in AP automation

One key concern for finance professionals is the return on investment (ROI) of implementing AI solutions. Brousseau emphasized the importance of evaluating the long-term benefits of AI, such as reducing manual workloads, minimizing errors, and allowing staff to focus on higher-value tasks.

"The ROI of AI extends beyond mere cost savings; it includes enhanced decision-making capabilities and the ability to scale operations efficiently," says Brousseau.

The financial impact of AI for AP automation can be substantial. Organizations can significantly reduce labor costs and reallocate resources to more strategic activities by automating repetitive and time-consuming tasks. Additionally, AI-driven solutions can minimize the risk of errors, such as duplicate payments or incorrect data entries, leading to costly discrepancies and financial losses.

AI also enhances decision-making by providing real-time insights and analytics. With access to accurate and up-to-date information, finance professionals can make more informed decisions regarding cash flow management, vendor relationships, and payment strategies. This improved visibility into financial operations enables organizations to optimize working capital and take advantage of early payment discounts, further enhancing the overall ROI of AI in AP automation.

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Common pitfalls and how to avoid them

Webinar experts highlighted several common pitfalls for finance and accounting professionals to avoid when implementing or refining their AP automation approach:

Misaligned processes and technology: Organizations often try to fit their processes into the limitations of the software they use. It’s crucial to choose AI solutions that can adapt to your existing workflows rather than the other way around. Misalignment between processes and technology can lead to suboptimal outcomes and hinder the effectiveness of automation initiatives. 

Organizations should thoroughly assess their AP processes to avoid this pitfall and identify areas where AI can add the most value. By selecting flexible and customizable AI solutions, businesses can ensure a seamless integration that enhances their existing workflows without requiring significant changes or disruptions.

Lack of scalability: Ensure that your chosen AI solution can grow with your organization. As business needs evolve, the technology should be able to handle increased volumes and complexity without requiring significant overhauls.

Scalability is a critical consideration when implementing AI in AP automation. Organizations should evaluate the scalability of AI solutions by considering factors such as processing capacity, data handling capabilities, and integration with other systems. 

"Choosing a solution that can scale with the organization’s growth ensures that the benefits of automation are sustained over time and that the technology can adapt to changing business requirements," says Mohr.

Employee burnout: While automation can significantly reduce manual workloads, it is essential to manage the transition effectively to avoid employee burnout.

"Automation should alleviate the burden on staff, not add to it. By automating tedious tasks, employees can focus on strategic activities that drive value," says Fisher.

Organizations should provide adequate training and support to help employees adapt to new technologies and processes. Additionally, by involving employees in the implementation process and soliciting their feedback, businesses can foster a sense of ownership and ensure a smoother transition to automated workflows.

Choosing the right AI solution

When selecting an AI solution for AP automation, consider the following:

• Adaptability: The solution should be flexible enough to integrate with your existing systems and processes.
• Accuracy: Look for AI technologies with high accuracy rates, particularly in data extraction and processing.
• Vendor support: Choose a provider that offers robust support and continuous improvements to their AI models.

Adaptability is crucial because every organization has unique processes and requirements. An AI solution that can easily integrate with existing systems and adapt to different workflows will provide the most value. 

Accuracy is equally important, as the effectiveness of AP automation relies on the precision of data extraction and processing. High accuracy rates reduce the need for manual corrections and ensure that financial data is reliable.

Vendor support is another critical factor. A strong partnership with the AI provider can ensure ongoing improvements and updates to the technology, addressing any issues that may arise while keeping the solution aligned with industry best practices. Look for technology providers that offer comprehensive support services such as training, technical assistance, and regular updates to their AI models.

Invest wisely

AI has the potential to transform AP automation by reducing manual effort, improving accuracy, and enhancing decision-making. However, choosing the right technology and avoiding common pitfalls during implementation is essential. By understanding AP automation's current state, AI's benefits over traditional OCR, and the critical factors in selecting AI solutions, finance professionals can make informed decisions that drive their organizations forward.