Automated Invoice Processing in Business Central
Supplier Bills Drafted in Business Central, Approved by a Person
Automated invoice processing in Dynamics 365 Business Central now has three routes. Microsoft's Payables Agent drafts purchase invoices from emailed PDFs. The E-Documents feature receives Peppol e-invoices in the Australian PINT A-NZ format, so nothing has to be read at all. Anything neither route handles well goes through an extraction step built in your own tenant, which writes drafts through the Business Central API.
In all three, a person approves the draft before it posts. The work is deciding which invoices go down which route, and what each draft must pass before anyone is asked to approve it.
This guide is for the finance manager, financial controller or business systems lead in a business that runs Business Central and still keys supplier bills by hand. The usual trigger is a visible backlog: invoices waiting at month end, a supplier chasing payment, or one person who is the only one who knows how a supplier's bills get coded.
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Why Keying Supplier Bills Keeps Coming Back
Most finance teams have tried something already. An OCR add-on that read the header and gave up on the lines. A shared mailbox rule that filed PDFs into folders nobody opened. A temp brought in for end of financial year.
These fail for the same reason. They speed up reading the invoice, and the time goes on the judgement after it: which vendor card this is when the supplier trades under three names, which job, dimension or GL account each line belongs to, and whether the document is a valid tax invoice at all.
Business Central has its own shape that makes this harder or easier depending on how it was set up. Dimensions, job (project) codes, purchase orders with partial receipts, and multiple companies in one tenant all add decisions to every bill. An automation that ignores them hands the work back to the team at the approval screen.
Route One: The Payables Agent for Emailed PDFs
The Payables Agent is Microsoft's built-in option. It watches a mailbox you nominate, reads PDF invoice attachments and creates purchase invoice drafts. Microsoft's Payables Agent FAQ states the design principle plainly: the agent creates drafts only and does not post invoices or make permanent changes to financial data without a person approving them.
What Microsoft documents about how it works:
- Vendor matching: it first looks for an exact match on registration numbers, then on name and address similarity, then searches your vendor list and transaction history.
- New vendors: if nothing matches, it can propose a new vendor, which stays blocked until a user reviews and unblocks it.
- Purchase order matching: Business Central validates vendor, line, unit of measure, currency, quantity, receipt and price conditions before allocating the invoice to an order.
What to check before you plan around it:
- It is for Business Central online. On-premises and partner-hosted installations do not get Copilot features.
- Microsoft's pricing pages list the Payables Agent as requiring Copilot Credits, sold separately. Budget for consumption, not a flat fee.
- Microsoft's documentation describes the feature as validated for English. Confirm your Australian localisation is on the current Copilot and agents availability list before a pilot.
For a supplier base that sends clean, single-invoice PDFs to one AP mailbox, this is the cheapest place to start. It is already inside the product, and the approval step is built in.
Route Two: Peppol E-Invoices Through E-Documents
Business Central's E-Documents framework supports the Peppol PINT A-NZ format for the Australian localisation. You choose a Peppol access point provider you have an agreement with, and invoices arrive as structured data with the ABN, lines and GST already in fields.
That removes the reading step entirely. The vendor is identified by ABN, the totals are what the supplier sent, and there is no PDF to alter on the way. The judgement steps (coding, dimensions, PO match) still apply.
There is no business to business e-invoicing mandate in Australia. Adoption is voluntary, so in most supplier bases Peppol starts as a minority channel. The push is coming from government: the ATO's eInvoicing for government guidance makes e-invoicing the default channel for Commonwealth procurement. Our guide to Peppol e-invoicing and the PDFs that still arrive covers the government timeline and the access point setup.
Route Three: An Extraction Step in Your Own Tenant
Some invoices do not suit either route. They are where the backlog usually lives:
- Scanned paper and photographed dockets with no text layer
- One PDF holding several invoices, or an invoice bundled with a statement and remittance
- Subcontractor progress claims that need a job and a cost code per line
- Bills where coding depends on knowledge the vendor card does not hold ("anything from this supplier under $500 is site consumables for whichever job the docket names")
- Volumes or attachment types outside the limits Microsoft sets for the agent
For these, an extraction step runs in your own Azure tenant in an Australian region. It reads the document, splits bundles, proposes vendor and coding from your own history, runs the GST checks below, and writes a draft purchase invoice through the Business Central API. The draft lands in the same place a keyed one would, and the same approval rules apply.
This is the kind of build our custom AI development service covers. You own the code and the credentials, and invoices never leave your tenant.
How a supplier bill becomes an approved purchase invoice
Which Route Suits Which Invoices
Count before you choose. Take the last three months of supplier bills and sort them by how they arrive and how hard they are to code. The mix decides the route.
Choosing a route for each invoice type
Expect to run two routes side by side. Clean suppliers go to the agent or Peppol. The hard minority goes to the extraction step. A few oddities stay manual, which is fine as long as everyone knows which ones.
What changes at the AP desk
| Metric | Keyed by hand | Drafted, then approved |
|---|---|---|
| Header and lines | Typed from the PDF | Read and filled into a draft |
| Vendor card | Searched by memory | Matched by ABN or name, new vendors blocked until reviewed |
| Job and dimensions | Known by one or two people | Proposed from your own posting history |
| GST validity | Checked when someone notices | Checked on every draft before approval |
| Posting | AP officer posts | AP officer approves, then posts |
GST Checks Every Draft Should Pass Before Approval
A draft that reads perfectly can still be a document you cannot claim a GST credit on. These checks come straight from the ATO's tax invoice requirements and belong in the pipeline, not in someone's head.
For sales under $1,000, the ATO says a tax invoice must show enough to work out seven things: that it is intended as a tax invoice, the seller's identity, the seller's ABN, the date of issue, a brief description with quantity and price, the GST amount (or a statement that the total includes GST), and the extent to which each item is taxable.
For sales of $1,000 or more, the invoice must also show the buyer's identity or ABN. A bill over that line addressed to the wrong entity, or to nobody, fails.
For sales of $82.50 or less including GST, a supplier does not have to issue a tax invoice, and you can claim with other evidence such as a receipt.
Two further checks are worth automating:
- ABN status: look the supplier's ABN up against the Australian Business Register and flag one that is cancelled or registered to a different name.
- No ABN quoted: where a supplier has not quoted an ABN, the ATO's no-ABN withholding rules may require you to withhold from the payment. Flag it before approval, not after payment.
A draft that fails any of these goes to the approver with the reason shown, so the AP officer sees "buyer ABN missing on a $4,200 invoice" instead of finding it at BAS time.
If several companies sit in one Business Central tenant, the buyer identity check also catches bills addressed to the wrong entity. That error otherwise surfaces during intercompany reconciliation at month end, which our multi-entity month-end close guide covers.
Proving It Works Before It Touches the Ledger
Nothing in this pipeline should post on day one. The pattern that earns a finance team's trust is shadow mode.
For a few weeks, the drafts are produced beside the normal process and nobody approves them. The AP team keys as usual. Each week, the drafts are compared field by field with what the team actually posted: vendor, GL account, job, dimensions, GST code, amount.
You set the accuracy threshold before shadow mode starts, per field if you like. When the drafts meet it, the process moves to co-pilot mode: the AP officer opens a prepared draft, corrects anything wrong, and approves it. Every correction is logged, and the corrections become the training set for the next round of tuning.
A three-phase path for Business Central AP
Each phase ends with an exit point. If the shadow mode numbers do not reach your threshold, you stop with a sorted invoice baseline and a clear picture of why, and you keep everything that was built.
What to Measure Before You Start
Without a baseline, nobody can say later whether the work paid off. Measure these on your current process first. The numbers are yours, so we have not filled them in.
Baseline to record before Phase 1 ends
The last line is often the one that starts the project. When only one person can code a supplier's bills, the exposure is the last week of June with that person on leave.
What the Partner Running Your Business Central Should Know
Most Business Central sites have a Microsoft partner who owns the configuration. Bring them in early. The extraction step writes drafts through the standard API, so it does not touch their customisations, but they need to know which posting groups, dimensions and approval workflows the drafts depend on.
Two settings deserve a check before the build:
- Purchase approval workflows: if Business Central's own approval workflow is switched on for purchase invoices, drafts flow into it like keyed ones. If it is not, decide who approves what before go-live.
- Default dimensions on vendors and items: good defaults mean fewer proposed codes and fewer corrections. Poor defaults get copied into every draft.
The same thinking applies beyond Business Central. Our guide to AI for accounting firms on Xero and MYOB covers the equivalent choices on those platforms, and Power Automate vs AI agents explains which steps should stay as fixed rules.
The lead on every Solve8 engagement spent 18 years on operations and data systems for BHP, Rio Tinto and Senex Energy, including ERP integration and reporting work, gained while working with previous consulting employers. These companies are not Solve8 clients. That background is why we start with the posting rules and the people who know them, and build the reading step last.
Common Questions
Does the Business Central Payables Agent post invoices automatically?
No. Microsoft's documentation says the Payables Agent creates purchase invoice drafts only and does not post invoices or make permanent changes to financial data without a person approving them. A user reviews each draft and decides whether to post.
Can Business Central receive Peppol e-invoices in Australia?
Yes. The E-Documents framework in the Australian localisation supports the Peppol PINT A-NZ format. You connect it to a Peppol access point provider you have an agreement with, and invoices arrive as structured data.
Is the Payables Agent available for on-premises Business Central?
Microsoft makes Copilot and agent features available to Business Central online only. On-premises and partner-hosted installations do not get them, so an extraction step that writes through the API is the usual route for those sites.
What GST details should an automated invoice check look for?
The ATO's seven tax invoice details for sales under $1,000, including the seller's ABN and the GST amount, plus the buyer's identity or ABN for sales of $1,000 or more. A draft that fails a check goes to the approver with the reason shown.
How long before automated invoice processing is trusted to run?
That depends on the threshold you set. Drafts run in shadow mode beside your normal keying and are compared field by field each week. Only once they meet your accuracy threshold does the AP team start approving drafts in place of keying.
Start With Your Invoice Mix
If your AP team keys supplier bills into Business Central, the first step is a sorted count of what arrives and how hard each kind is to code. That count tells you whether the built-in agent covers most of it, whether Peppol is worth pushing with suppliers, and what is left for an extraction step in your own tenant.
Book a 30-minute scoping call and bring last month's invoice count by type. We will tell you which route each kind belongs on. The count and the shadow-mode build run as Phase 1 of a process automation engagement, with the system integration work that connects the extraction step to Business Central.