How a reputed auditing firm reduced cost of processing by 75% using AI

Summary of Data Processing Case Study

With increased tax regulations, the Accounts Payable (AP) process has become even more important in today’s dynamic business environment. Any negligence in complying with the statutory laws during invoice processing or payments can lead to severe financial implications for any company.

Our client, a reputed auditing and investigation firm, specialises in examining the accounting payable and receivable processes and identify any material misstatements, errors or frauds.

The firm works with companies and enterprises who are willing to improve their decision-making based on the key outcomes of various process reviews.

The Business Challenge

While making payment to the vendors or crediting their ledgers, a company has to deduct Tax Deduction at Source (TDS) and deposit it with the Government.

However, it is easier said than done. Several sections according to the purpose of payment, cumbersome threshold limits and detailed applicability criteria make TDS deductions an intricate process.

The firm’s client was a business enterprise who was procuring goods and services from hundreds of vendors, resulting in hundreds of thousands of invoices. The invoices also contained multiple line items comprising of materials (which do not have TDS) and services (which have a TDS component). The enterprise AP team was overwhelmed by the resulting millions of TDS decisions and made several errors and omissions while accounting for the transactions. This resulted in notices and severe penalties from the tax authorities.

Consequently, the business had to suffer huge penalties and interest, leading to a huge impact on the cashflows.

Taking a major decision, the client commissioned a review and investigation process to re-examine 100% invoices received from the vendors and identify the mismatches in TDS deduction.

Our client, the review and investigation firm, identified formidable challenges during this assignment.

Issues with Manual Data Processing

  1. Difficulty in data extraction: Due to the varied formats of the invoices from each vendor/ supplier, and the inappropriate quality of scanned documents, the accounting team faced severe difficulties in extracting the requisite information.
  2. Volume of data processed: The growth of technology adoption and ubiquitous digitalisation has led to data explosion. Therefore, firms currently require a large team, expensive software and extended period of time to organize, analyse and interpret the data. The cost of this process is exponentially increasing on a daily basis.
  3. Negligence due to mental fatigue: To perform mundane tasks, the team of 16 members had to work 60 hours every week continuously which could result in mental fatigue and increase the probability of errors. It was a time-bound assignment as well, forcing the firm to over-burden the existing members in case of any manpower shortage.
  4. Complications in analysis and compilation of results: The team relied on spreadsheets to analyse and compile data using formulas and manual calculations which increased the probability of incorrect examination and false opinion.

The Prudent AI advantage

Prudent AI not only countered these challenges expertly, but also helped the firm add significant value to the client enterprise.

Features in PrudentAI Data processing

The firm used following main features of Prudent AI product:

  1. Simple Set up – In minutes, one can drag and drop or easily upload different types and formats of documents. All scanned files were uploaded to clients’ AWS Storage where Prudent AI application uses AI Powered OCR to capture data.
  2. AI Powered OCR – Prudent AI uses neural networks & reverse image search to deliver superior data extraction consistency across different type of documents whether it is images (.PNG, .TIF, .JPEG), scans or digital files (PDF, CSV, XLS, ODT) or different formats in each document type, despite unstructured invoices in various formats from different vendors. Using computer vision, semantic analysis and deep learning, Prudent AI also caught keywords, phrases, amounts, dates, prices and other relevant information with high accuracy.
  3. Human-in-loop – The key gap in most data extraction solutions in not the level of its accuracy, but consistency, completeness of processing and human interaction design. Prudent AI clearly segments the invoices that need human intervention to maintain high accuracy and confidence in the processed output.
  4. Process Intelligence Reports – Prudent AI extracted all the valuable insights from the invoices processed to identify vendors whose invoices were not readable as well as identifying the criticality of the vendor based on volume and value of invoices processed. This augmented insight is provided to business process owners as a report to improve the operational efficiencies in the next run and automate the complete process to reduce the cost of processing further.
  5. Integrate into any software and download data easily – Processed data through Prudent AI could be easily extracted into a CSV file and downloaded in just a click. For organizations who would want this to be integrated with their software, it is done in seamless manner through API integration.

Data Highlights

Data Highlights
  1. Our client was able to substantially reduce costs by 75% by reducing the number of accountants required to review from 16 to 4 FTEs. Prudent AI was able to read 67% invoices correctly. Also, as compared to human experts, Prudent AI showed 97% accuracy during the data capture.
  2. In 33% cases, where it was unable to extract the information, it flagged the invoices, asking for human intervention in those cases. These reports provided powerful insights to improve operational efficiencies going forward.

Business Impact

The investigation and audit firm, with the help of Prudent AI, was able to achieve:

  1. Substantial reduction in costs – The firm was able to reduce manpower spent on this investigation, thus freeing up bandwidth for the other team members to focus on complex matters that require critical expertise. Using an AI-powered platform also enhanced their productivity by eliminating stress and fatigue.
  2. Improved turnaround time – Prudent AI reviewed the invoices around the clock, resulting in 10x faster turnaround time. It also left enough time with the auditors to look at high-risk transactions patiently.
  3. Better NPS (Net Promoter Score) – Because of a much lesser turnaround time and hidden insights, the firm was able fetch a higher Net Promoter Score from their client.

Road Ahead

Data analysis, audits and investigations are no longer formalities for an organisation. Companies are proactively recruiting the firms to examine the crucial processes and report key anomalies and process gaps. By controlling these gaps and eliminating anomalies, organisations are thriving and creating an edge over the competition.

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