Written By Tim Lally (President)

In mid-2025, Microsoft introduced the Dynamics 365 Business Central Payables Agent (version 26.3+), an AI-powered tool designed to simplify vendor invoice processing. This feature reduces manual entry, lowers errors, and accelerates invoice cycles for finance teams.

What Is the Payables Agent?

The Payables Agent acts like an intelligent assistant inside Business Central. It monitors a Microsoft 365 mailbox for incoming vendor invoices, extracts and interprets the data, and then prepares a purchase invoice draft for review. By applying AI, historical purchase data, and preset accounting rules, it accurately fills in fields while maintaining transparency.

How the Payables Agent Works

1. Activation and Configuration

First, enable Copilot and Agent capabilities in Business Central. Then, link a dedicated Microsoft 365 mailbox (for example, ap@yourcompany.com) to handle invoice intake.

2. Invoice Detection & Import

The agent continuously scans the inbox for emails with PDF attachments. Each PDF is imported into the Inbound E-Documents section as a new document ready for processing.

3. Data Extraction

Using Azure Document Intelligence (OCR), the agent extracts critical invoice details such as vendor, dates, line items, totals, and taxes, storing them directly in Business Central.

4. Vendor Matching & Creation

The agent attempts to match vendors to existing records. If uncertain, it prompts a human supervisor to confirm or create a new vendor. Newly created vendors are blocked initially for compliance and auditing purposes.

5. Invoice Draft Creation

AI and historical data help the agent populate draft invoice fields. Supervisors see inline suggestions with explanations, improving trust and decision-making.

6. Review & Approval

Supervisors review the draft, make adjustments if needed, and approve it. Once finalized, the draft becomes a purchase invoice ready for posting.

Benefits for Businesses

• Boosts Productivity: Reduces manual data entry so teams can focus on strategic tasks like vendor relationships and cash planning.
• Reduces Errors: Automates extraction and field mapping to lower human mistakes.
• Faster Invoice Cycles: Speeds up the process from invoice receipt to posting.
• Transparent & Auditable: Maintains logs of every step—from email receipt to invoice posting.
• Scalable and Configurable: Handles high volumes, integrates with email/SharePoint, and supports custom fields.

Limitations

Currently, the Payables Agent:

• Only handles PDF attachments
• Generates draft invoices only; final approval is manual
• Cannot create items, GL accounts, or credit memos yet

Future updates may include PO matching and anomaly detection.

Getting Started: Best Practices

• Pilot Wisely: Start with routine costs (utilities, subscriptions) for easier matching.
• Ensure Clean Input: Ask vendors for machine-readable PDFs and clear invoice numbers.
• Set Tolerances: Configure realistic variance limits to reduce false exceptions.
• Track KPIs: Measure first-pass accuracy, cycle time, and exception rates.
• Control Billing: Monitor Copilot Studio usage since billing is usage-based after preview.

Conclusion

The Dynamics 365 Business Central Payables Agent transforms manual invoice entry into an AI-driven, efficient process. By automating extraction and draft creation, finance teams can focus on value-added tasks while maintaining control, transparency, and audit compliance.

Need more guidance? Check Microsoft’s documentation on Business Central or see our internal AP automation guide.

Contact KTL today!