Xero’s accounts payable (AP) works well—until your business grows. Then, manual invoice approvals, invoice-to-PO mismatches, and tracking payments across multiple entities slow everything down.

Common issues:
❌ Invoice approvals are stuck in email threads, causing poor cash flow planning.
❌ Manual invoice-to-PO matching slows down the AP process and causes late payments.
❌ Tracking AP across multiple Xero instances is inefficient.
❌ Processing costs climb as high as $17 per invoice.

You might have tried existing solutions like Hubdoc and might be considering switching to an ERP, which is costly and complex. Before you go that route, explore how to enhance Xero’s AP automation without overspending.

This guide covers:
✔ Automating invoice approvals to eliminate email bottlenecks
✔ Streamlining PO matching to reduce errors
✔ Tracking invoices across multiple entities more efficiently
✔ Lowering processing costs by up to 80%

Let’s get into the details.

We designed ProcureDesk to simplify accounts payable and bookkeeping with Xero. You can read more about Xero AP automation or schedule a demo to see ProcureDesk and Xero Accounts Payable automation.

What Is Xero Accounts Payable Automation?

Xero accounts payable automation refers to the capabilities offered by the Xero accounting system to manage your accounts payable process.

At a very high level, AP automation software should cover the following aspects:

1. Ability to import an invoice into the accounting system for processing.
2. Automation to speed up the invoice creation process, for example, invoice data extraction using OCR (Optical Character Recognition) and automatically creating the invoices.
3. Match the invoice with other documents like purchase orders and receipts to perform a 3-way or 2-way match process.
4. Route invoice exceptions for any approvals in case of any exceptions.
5. Keep an audit trail of all the changes to an invoice document.
6. Ability to connect to banks for payments and issue payments using electronic payments.
7. Send remittance advice to the vendor after the payment has been made.
8. Provide detailed cash flow visibility for the CFO and management team.

Xero Accounts Payable Automation Review

Xero provides a good set of features if you are just getting started. Here are a few things that you can do in Xero.

• Upload a bill in Xero and mark it approved for payment.
• Schedule the bills for payment.
• Link a purchase order to the Bill by manually establishing the reference number.
• Schedule payments for approved Bills.

However, if you are a growing company, you probably need the following features that are not available in Xero:

• Ability to store packaging slips and create receipts for purchase orders.
• OCR(Optical Character Recognition) capabilities for extracting the invoice information from the document.
• Match the invoice with the purchase order and receipt for a three-way match.
• Match the invoice with the purchase order and perform a 2-way match.
• Workflow capabilities to route the invoice for approvals in case of exceptions or when you have invoices without any associated purchase order.
• Ability to see all invoices in one place irrespective of the company created in Xero.

If you are struggling with these issues, a bolt-on solution can help. In the next section, we will cover how to use ProcureDesk to enhance the capabilities of Xero.

Related: Biotech Procurement Software – Navigating Biotech Procurement Challenges

Xero Accounts Payable Automation With ProcureDesk

In this section, we will discuss a step-by-step process on how a bolt-on can help you improve the accounts payable process in Xero. We are using ProcureDesk accounts payable software as an example, but you can use any system that works with Xero accounting software.

The main difference in the process is that instead of creating an invoice directly in Xero, you first create that in a system like ProcureDesk.

The system then matches the invoice with the purchase order and receipts, and then after the invoice is approved for payment, it is automatically created in Xero.

Xero users can then pay the vendor using their current Xero methods or the ProcueDesk Bill payment feature to pay vendors. 

This approach simplifies invoice processing without needing to change the payment process in Xero.

In the next few sections, we will cover how to process invoices in a system like ProcureDesk and how the information will flow to Xero.

Related: 7 Procurify Alternatives (Budget-Friendly Purchase Order Software)

Automatically Imports Invoices from Email

The first step towards processing supplier invoices is to import them into your accounting system.

You might receive invoices from different sources if you don’t have a well-defined process. For example, a vendor might send an invoice to a stakeholder or email the invoices to an AP email address.

Whatever your current situation, we recommend the following process to streamline your invoice intake process.

• Dedicated address for email addresses: Set up a dedicated address. Don’t use your AP email address because that might be noisy, and you have inquiries and other emails. This could be as simple as invoices@yourcompany.com.
• Vendor Invoices: Make sure vendors send invoices to the new email address. Include these instructions on every purchase order and notify employees.
• Forward Invoices to new emails: At first, suppliers may still use the old process. Instruct stakeholders to forward any invoices to the new email address.

Once this process is implemented, you have all your invoices in one place.

For the next step, you must set up auto-forwarding to a new email address provided by a system like ProcureDesk—for example, yourcompanyname@procuredesk.com.

The system now gets all the invoices automatically without requiring you to upload every single invoice in a system like Xero. You can also set up notifications so that you are notified when the system receives a new invoice. 

 OCR For Automated Invoice Creation

The next step is to automatically create an invoice once the invoice is imported into the system.

ProcureDesk OCR (Optical Character Recognition) and AI combination make it easier to create the invoice by automatically extracting relevant information from the invoice attachment.

ProcureDesk OCR can extract the following information:

• Vendor information
• Invoice numbers
• Due dates and terms
• Line item descriptions and unit price information.

The system then uses this information to create a new invoice and automatically match it with a purchase order.

Purchase orders are also created in the ProcureDesk accounting software, so the system already has the purchase order information for matching.

The following is an example of the invoice that is created from OCR:

Automated Coding Of Invoices

Coding the invoices is always challenging for the AP team because they don’t always know where a particular invoice should be coded. In ProcureDesk, you can code the invoice to the respective chart of accounts or any specific tracking categories like departments or projects. 

ProcureDesk automates invoice coding to save you time and reduce manual errors. Here’s how it works:

1️⃣ Automatic PO Matching – When an invoice matches a purchase order, the system pulls coding directly from the PO. This includes the GL code, tracking categories, and chart of accounts, ensuring accurate line-level coding.

2️⃣ User-Based Coding Rules – The system can also assign codes based on who made the purchase. For example:

• If John in IT buys a laptop, it’s automatically coded to the IT department’s GL code.
• If an invoice comes from a specific utility supplier, it’s assigned to the correct account category.

You can define these coding rules in ProcureDesk, so invoices are automatically categorized—no manual input is needed.

3-way Matching For Invoices

3-way matching is the best practice followed by leading AP teams.

With a 3-way match, you eliminate the need to get invoices approved before the payment. When an invoice matches the purchase order for price and receipt confirming the product is received, there is no need for the invoice to be approved.

The challenge is that it is very time-consuming. AP teams often contact stakeholders to ask for packaging slips and manually check invoices against purchase orders and receipts. This is a very time-consuming process, and that is why many Accounts payable teams don’t implement this process.

With ProcureDesk, you can fully automate this process.

This is how it works:

• The system automatically pulls the information from the invoice document and creates the invoice.
• If a purchase order number is present on the invoice, the system automatically matches the invoices with that purchase order.
• If a receipt is missing, the system automatically notifies the person who purchased the product.
• The person enters the system or uses their mobile app to create a receipt.
• The system matches the receipt, invoice, and purchase order.
• If all three match (Quantity, price), the system sends the Bill to Xero for payment.
• If the documents don’t match, the system uses a pre-defined workflow to route the invoice to the appropriate person for review.

Here is an example of a 3-way match result:

If you’re looking for a system that works perfectly with Xero, you might want to explore the wonders of ProcureDesk. We have a team of product specialists to assist you. See our tool in action today!

Now, what if the invoice needs to be routed for further approvals? That is what we are going to discuss next.

Workflows For Routing The Invoice For Approvals

In our research, AP teams spend most of their time chasing stakeholders and getting the invoices approved.

With ProcureDesk, this is not an issue anymore.

First, you set up a workflow so the system knows how to send different invoices for approval.

Here are four essential workflows to set up for handling invoices efficiently:

1. Handling 3-Way Match Exceptions – Define a process for when an invoice doesn’t match the purchase order and receipt. Determine who should review discrepancies and how they should be resolved.
2. Processing Service Invoices – Unlike material products, service invoices require validation before payment. Assign someone from Operations to review and confirm that the service was delivered.
3. Managing Invoices Without a Purchase Order – Some expenses, like rent or facility payments, don’t have a PO. Establish a workflow for handling these invoices, ensuring they are reviewed and approved before payment.
4. Routing Invoices for Account Code Assignment – When finance teams receive invoices without predefined account codes, they need to be reviewed by the appropriate department. Set up a process to route these invoices to the right person for coding and approval.

ProcureDesk simplifies the approval workflow setup process.Here is an example of how easy it is to set up approval workflows:

The top use cases you should consider while designing the approval workflow are the above.

Once the approval workflow is defined, the system automatically routes the invoice for approvals.

The approvers are automatically reminded of the pending approvals, so you don’t have to chase approvals!

Mobile App For Approvals

If your employees are always on the road, getting the appropriate approvals on time could be a challenge.

That is where a mobile app can help speed up the approval process.

Employees can easily approve the invoices on the go without the need to be in front of a computer.

Here is an example of how the mobile approvals works:

Mobile app for approvals

Automated Data Sync With Xero Integration

Automated accounts payable like ProcureDesk make it simple to process invoices, but it is useless if you manually create those invoices in your online accounting software.

That is why it is important that the Xero Accounts Payable automation solution automatically syncs the invoices with Xero.

Once approved, ProcureDesk automatically syncs the invoices with Xero. There is no need to export the data from the system and import it into Xero. The system also keeps the master data like the chart of accounts, suppliers, and tracking categories, in sync so that you always have to upto data in ProcureDek.

The system takes care of syncing the data in real-time. This includes not just sending the data but also the attachment of the invoice.

Multiple Xero Companies In A Single Instance

If you have multiple companies within Xero, you have to switch companies continuously, and there is no easy way to report or see all transactions in one place.

ProcureDesk solves that problem by allowing you to manage the transaction data from different companies in one place and allow you to see reporting across different companies.

Companies are called business units in ProcureDesk; within the same instance, you can have multiple Xero companies.

You can then easily control who has access to which business unit and who can create transactions across these business units.

Super users can see reports across different business units without switching companies.

Here is an example of a report with different business units:

Xero Integration Considerations

When choosing an accounts payable system that seamlessly integrates with Xero, it’s essential to remember a few vital considerations.

This integration can significantly enhance your invoice management process, so here’s what you must focus on:

Data Accuracy And Alignment

Ensure that the accounts payable automation system you’re considering can synchronize data accurately with Xero.

Vendor details, invoice information, and payment terms should seamlessly match between the two platforms.

A minor mismatch can lead to payment delays and reconciliation challenges. Look for a solution that prioritizes consistent data alignment to avoid discrepancies.

Workflow Adaptation And Approvals

The integration should complement your existing invoice approval workflows.

Look for a system that allows you to map out your unique approval hierarchy, set spending limits, and incorporate multi-tiered authorizations.

This ensures a smooth transition from procurement to payment, aligning with your organization’s financial policies and maintaining compliance.

Flexibility For Growth And Customization

Consider the long-term scalability of the integration.

Your chosen system should be flexible enough to accommodate your evolving business needs and increased invoice volumes.

Seek an accounts payable solution that offers customization options, allowing you to capture specific invoice attributes crucial for your accounting practices.

This customization ensures a tailored fit for your processes.

Related: Purchasing System Options For Growing Companies

The Bottomline

Struggling with the limitations of Xero Accounts Payable automation? Before leaping to an expensive ERP solution, explore how you can augment Xero’s capabilities affordably.

Xero’s AP modules offer solid automation for small businesses with minimal invoices. Yet, the need for additional solutions becomes evident as your operations expand.

Managing multiple companies in Xero or incorporating invoice approvals via email can lead to human errors and inefficiencies, driving up invoice processing costs.

With an AP automation solution that seamlessly integrates with Xero, you can enhance Xero with the following capabilities:

• Automated Invoice Creation: With OCR technology, invoices are automatically extracted and created, simplifying the process and minimizing manual data entry.
• Efficient Matching: The system matches invoices with purchase orders and receipts, reducing manual effort and ensuring accuracy.
• Workflow Automation: Streamlined approval workflows eliminate bottlenecks, reducing time spent chasing approvals and preventing delays.
• Seamless Xero Integration: The system syncs approved invoices with Xero in real-time, reducing manual data transfer and potential errors.
• Multi-Company Management: For businesses with multiple entities, the system provides consolidated reporting and management across different business units.

By considering data accuracy, workflow adaptation, and customization for growth, you can select an accounts payable system that integrates seamlessly with Xero and aligns with your business needs.

ProcureDesk’s integration with Xero offers a powerful solution that optimizes your AP automation, enhances efficiency, and empowers you to take control of your financial processes.

Explore the possibilities of ProcureDesk to elevate your Xero AP automation capabilities without straining your budget.