Automated invoice processing in Dynamics 365 Business Central now has three routes. Microsoft's Payables Agent drafts purchase invoices from emailed PDFs. E-Documents receives Peppol e-invoices in the Australian PINT A-NZ format as structured data. Anything else goes through an extraction step that writes drafts through the Business Central API. In every route, a person approves before posting.
The real 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 finance managers, financial controllers and business systems leads in mid-sized to enterprise, multi-entity organisations that run Business Central and still key supplier bills by hand.
Key takeaways
- Business Central has two built-in routes (the Payables Agent and Peppol through E-Documents) and both create drafts only. Nothing posts without a person.
- Scans, bundled PDFs and subcontractor claims coded to jobs usually need a separate extraction step that writes drafts through the standard API.
- Every draft should pass the ATO tax invoice checks, including the buyer identity rule for invoices of $1,000 or more, before it reaches an approver.
- Count three months of supplier bills by type before choosing a route. The mix decides the answer.
- Run the drafts alongside your AP team until they match what your people would have keyed, then switch to approve-and-post.
Why does keying supplier bills keep coming back?
Most finance teams have already tried something. An OCR add-on that read the header and gave up on the lines. A 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, but 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 adds its own decisions. Dimensions, job codes, purchase orders with partial receipts, and several companies in one environment all add choices to every bill. An automation that ignores them hands the work back to the team at the approval screen.
How does the Business Central Payables Agent work?
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 looks for an exact match on registration numbers first, then 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 before allocating the invoice to an order.
What to check before you plan around it:
- It is for Business Central online. Microsoft does not offer Copilot and agent features for on-premises installations.
- Microsoft lists the Payables Agent as consuming Copilot Credits, which are billed separately. Budget for usage.
- Confirm your Australian localisation and language are on Microsoft's current availability list for Copilot and agents before a pilot.
For a supplier base that sends clean, single-invoice PDFs to one AP mailbox, this is the obvious place to start. It is already inside the product and the approval step is built in.
Can Business Central receive Peppol e-invoices in Australia?
Yes. Business Central's E-Documents framework supports the Peppol PINT A-NZ format in the Australian localisation. You connect it to 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.
Business-to-business e-invoicing is voluntary in Australia, so in most supplier bases Peppol starts as a minority channel. The push comes from government: the ATO's eInvoicing for government guidance sets out e-invoicing for Commonwealth procurement. Our guide to Peppol e-invoicing and the PDFs that still arrive covers access point setup in more detail.
When do you need a custom extraction step?
Some invoices suit neither built-in route, and they are usually where the backlog 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 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 on your infrastructure in Australia (your cloud or your own servers). It reads the document, splits bundles, proposes vendor and coding from your own posting history, runs the GST checks below, and writes a draft purchase invoice through the Business Central API. The draft lands where a keyed one would, and the same approval rules apply.
This is the kind of build our custom AI development team delivers. You own the code and the credentials, and invoices never leave your environment.
- Bill arrivesPDF to the AP mailbox, or Peppol e-invoice through E-Documents
- Fields readSupplier, ABN, lines, GST and totals extracted
- Vendor and PO matchedVendor card found, order and receipt checked
- Coded and checkedGL, job and dimensions proposed, GST rules applied
- Person approvesAP officer confirms or corrects the draft
- Posted in Business CentralPurchase invoice posted, correction logged
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.
How does this group of invoices arrive, and how hard is it to code?
- Clean single-invoice PDFs by email, coding follows the vendor card or POPayables Agent
- Supplier can send through a Peppol access pointE-Documents with PINT A-NZ
- Scans, bundled PDFs or claims coded to jobs and dimensionsCustom extraction step
- A handful a month with unusual termsKeep keying by hand
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.
| 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 |
What GST checks should every draft pass?
A draft that reads perfectly can still be a document you cannot claim a GST credit on. These checks come from the ATO's tax invoice requirements and belong in the pipeline, not in someone's head.
Sales under $1,000: the invoice must show enough to work out that it is intended as a tax invoice, the seller's identity and 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.
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.
Sales of $82.50 or less including GST: the 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: 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 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. Where several companies sit in one Business Central environment, the buyer identity check also catches bills addressed to the wrong entity, an error that otherwise surfaces in intercompany reconciliation. Our multi-entity month-end close guide covers that side.
How do you prove it works before it touches the ledger?
Nothing in this pipeline should post on day one. For a few weeks, drafts are produced alongside 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 and amount.
You set the accuracy threshold before that period starts, per field if you like. When the drafts meet it, the AP officer starts opening prepared drafts, correcting anything wrong and approving. Every correction is logged and feeds the next round of tuning.
- Weeks 1 to 4Discovery and baselineSort three months of bills by route, measure the backlog and keying time, set the accuracy threshold
- Weeks 5 to 12Build and run alongside the teamConfigure the agent or Peppol, build the extraction step, compare drafts with keyed invoices weekly
- Weeks 13 to 18Approve-and-post and handoverAP approves every draft, corrections are logged, code and runbooks handed to your IT team
Each phase ends with a decision point. If the drafts do not reach your threshold, you stop with a sorted invoice baseline and a clear picture of why, and you keep everything built so far.
What should you 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.
- Supplier bills per month, split by routeYour count
- Average minutes to key and code one billYour timing
- Bills waiting at each month endYour backlog
- Bills reworked after posting (wrong job, GST or entity)Your rework rate
- People who can code the hardest suppliersYour key-person count
The last line often 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 should your Business Central partner 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 on for purchase invoices, drafts flow into it like keyed ones. If it is off, 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 equivalent choices on those platforms, and Power Automate vs AI agents explains which steps should stay as fixed rules. For the wider picture, see our complete guide to automated invoice processing.
Across our consultants' careers, including ERP integration and reporting work in environments such as BHP, Rio Tinto and Senex Energy, the lesson has been consistent: start with the posting rules and the people who know them, and build the reading step last.
How Solve8 can help
Our team sorts your invoice mix, configures the built-in routes where they fit, and builds the extraction step and Business Central connection for the rest, with a person approving every draft. The work runs as fixed-fee phases through our process automation and system integration services. Talk to us and bring last month's invoice count by type.
