How AI can revolutionize your invoice reconciliation process
Element AI Element AI
October 4 4 min

How AI can revolutionize your invoice reconciliation process

Of all the accounting tasks faced by retailers and other businesses, invoice reconciliation can be one of the most laborious and time-consuming. Comparing payments with their corresponding invoices and processing them can be an onerous, error-prone manual task for bookkeepers. However, recent advancements of AI in accounting can ease the load.

But before we examine how machines can make life easier for accounting staff, let’s look at the old-fashioned way of doing things, to get a sense of contrast:

Reconciling invoices by hand

Manual invoice reconciliation requires you to compare two or more documents, for instance, an invoice and a bank statement, to check that the amount that’s been paid is the same as the amount that is owed.

This requires the person processing the invoice to go through it, and the bank statement, line by line to check that everything matches up, and all the sums add up. The information is then entered into the organization’s general ledger. If there are discrepancies between the invoice and the payment, the payee will then contract the other party to resolve the matter.

Many companies process large volumes of invoices, and some with a high degree of complexity – such as different items or services listed. Manual input errors easily occur, such as transposed numbers, inaccurate calculations or simple typing mistakes. Accounts personnel can become fatigued, bored, or careless, as is the case with anyone doing repetitive work over an extended period.

Early machine processing

With the advent of optical character recognition (OCR) technology, it became feasible for machines to take up some of the heavy lifting. Invoices would be scanned, and then OCR would recognize values in the documents such as the total paid, the payer’s account details, etc. The data would then be captured and processed.

But it was still far from an ideal situation. There is no universal invoice format, so in order for their software to work with suppliers’ invoices, businesses would need to request a copy of each supplier’s invoice template, which they would then input into their system – a laborious task in itself. And early character recognition algorithms were hardly infallible – especially if faced with a badly-printed document, where one smudged or incomplete numeral or character could be mistaken for another. In those days, the amount of time it took to administrate digital invoice capture, and correct its mistakes, severely detracted from its usefulness as a time-saving technology. But no longer.

Invoice reconciliation with AI

Today, advances in AI in accounting deliver more sophisticated solutions. They can get a sense of the invoice’s page structure and recognize and extract data without needing the layout to be explained first via a template.

An AI system will capture details such as the buyer’s name and address, the seller’s name, address and bank details, and invoice information such as date, tax, and amount due. The checks and calculations are then made and recorded – quickly and accurately.

AI systems can also apply complex analysis to check contract compliance – for instance, adherence to negotiated payment terms, unit prices, volumes and discounts. And they can even sort invoices and prioritize them according to their due dates and other factors.

Because accounting AI systems are able to learn, they can take human feedback and corrections on board and use them to improve performance during future invoice processing. The systems can also analyze compliance patterns in supplier and shipment data and provide organizations with insights that allow them to negotiate better terms.

So, not only can these systems reduce invoicing workloads and increase efficiency, but they can also help businesses to optimize their spending in wider-reaching ways. A very useful assistant for an accountant, I think you’ll agree.

A bright future for accountancy

AI-driven invoice reconciliation may be a powerful and valuable new method for accountancy personnel, but human supervision remains key to the process. As a 2019 article in Canadian Accountant states, accountants have always played a central role as “guardians of trust”, providing the integrity, transparency, and accountability that are the cornerstones of the profession.

And, as Jon Raphael, CPA, chief innovation officer at Deloitte told CPA Insider at the Journal of Accountancy: “We don't want to have people relying on a tool blindly.” He followed: “The accountants of the future will exist, but they will know how to interact with machines.”

After all, AI systems are tools – calculation machines – and the profession has always adopted timesaving, precision-enhancing devices as long as it has existed. Think of AI systems as an evolution of the abacus, via the pocket calculator. The sophistication of an accountant’s tools has increased over time, but they still need an accountant’s hand to wield them.