💫ERP Systems: Microsoft Dynamics 365's Invoice Capture (Features)

Disclaimer: This is work in progress intended to consolidate information from the various sources (what I considered as important during my exploration of the documentation and further communication) and not to provide an overview of all the features. Please refer to the documentation for a complete overview!

In what concerns the releases see [2].
Last updated: 23-May-2024

Invoice Capture - Main Components [3]

AI Model

• {feature} prebuilt model (aka Invoice processing model) [by design]
• can handle the most common invoices in various languages
• owned by Microsoft and cannot be trained by the customers
• {feature} custom prebuilt models [planned]
• built on top of the prebuilt model to handle more complex invoice layouts
• only requires to train the exceptional invoices
• after a model is published, additional mapping is required to map the model fields to the invoice files
• {feature} custom model [by design]
• requires training the model from scratch 
• costs time and effort
• supports the Charges and Sales Tax Amount fields [1.5.0.2]
• support lookup lists on custom fields [1.6.0.x]

Channels

• flows that collect the invoices into one location 
• there's always a 1:1 relationship between flows and channels
• multiple channels can be defined using different triggers based on Power Automated connectors
• {feature}default channel for Upload files [1.0.1.0]
• {feature} supports multiple sources via flow templates [by design]
• Outlook.com
• Microsoft Outlook 365
• Microsoft Outlook 365 shared mailbox [1.1.0.10]
• to achieve similar behavior one had to modify the first steps of the generated flow with the "When a new email arrives in a shared mailbox (V2)" trigger
• SharePoint
• OneDrive
• OneDrive for business [1.0.1.0]
• {feature} assign legal entity on the channel
• the LE value is automatically assigned without applying additional derivation logic [1]
• invoices sent via predefined channels are captured and appear on the 'Received files' page

Configuration groups 

• allow managing the list of invoice fields and the manual review settings 
• can be assigned for each LE or Vendors. 
• all the legal entities in the same configuration group use the same invoice fields and manual review setting
• default configuration group 
• created after deployment, can't be changed or deleted
• 
  

Fields

• {feature} standard fields 
• Legal entity 
• organizations registered with legal authorities in D365 F&O and selected for Invoice capture
• {feature} allow to enforce role-based security model
• {feature} synchronized from D365 F&O to CRM 
• {missing feature} split the invoices between multiple LEs
• Vendor master 
• individuals or organizations that supply goods or services
• used to automatically derive the Vendor account
• {feature} synchronized from D365 F&O to CRM
• synchronization issues solved [1.6.0.x]
• {feature}Vendor account can be derived from tax number [1.0.1.0]
• Invoice header
• {feature} Currency code can be derived from the currency symbol [1.0.1.0]
• Invoice lines
• Item master
• {feature} Item number can be derived from External item number [1.0.1.0]
• {feature} default the item description for procurement category item by the value from original document [1.1.0.32/10.0.39]
• Expense types (aka Procurement categories) 
• Charges
• amounts added to the lines or header
• {feature} header-level charges [1.1.0.10]
• {missing feature}line-level charges 
• {feature}Financial dimensions 
• header level [1.1.0.32/10.0.39]
• line level [1.3.0.x]
• Purchase orders
• {feature} PO formatting based on the number sequence settings
• {missing feature}PO details
• {missing feature} multiple POs, multiple receipts 
• {missing feature} Project information integration
• {workaround} the Project Id can be added as custom field on Invoice line for Cost invoices and with this the field should be mapped with the corresponding Data entity for transferring the value for D365 F&O
• {feature} custom fields [1.1.0.32/10.0.39]

File filter

• applies additional filtering to incoming files at the application level
• with the installation a default updatable global file filter is provided
• can be applied at different channel levels
• {event} an invoice document is received
• the channel is checked first for a file filter
• if no file filter is assigned to the channel level, the file filter at the system level is used [1]
• {configuration} maximum files size; 20 MB
• {configuration} supported files types: PDF, PNG, JPG, JPEG, TIF, TIFF
• {configuration} supported file names 
• filter out files that aren't relevant to invoices [1]
• rules can be applied to accept/exclude files whose name contains predefined strings [1]

Actions 

• Import Invoice
• {feature} Channel for file upload
• a default channel is provided for directly uploading the invoice files
• maximum 20 files can be uploaded simultaneously
• Capture Invoice
• {feature} Invoice capture processing
• different derivation rules are applied to ensure that the invoices are complete and correct [1]
• {missing feature} differentiate between relevant and non-relevant content}
• {missing feature} merging/splitting files
• {workaround} export the file(s), merge/split them, and import the result
• Void files [1.0.1.0]
• once the files voided, it is allowed to be deleted from Dataverse
• saves storage costs
• Classify Invoice
• {feature} search for LEs
• {feature} assign LE to Channel
• AP clerks view only the invoices under the LE which are assigned to them
• {feature} search for Vendor accounts by name or address 
• Maintaining Headers
• {feature} multiple sales taxes [1.1.0.26]
• {missing feature} rounding-off [only in D365 F&O]
• {feature} support Credit Notes [1.5.0.2]
• Maintaining Lines
• {feature} Add/remove lines
• {feature} "Remove all" option for deleting all the invoice lines in Side-by-Side Viewer [1.1.0.26]
• Previously it was possible to delete the lines one by one, which by incorrectly formatted big invoices would lead to considerable effort. Imagine the invoices from Microsoft or other cloud providers that contain 5-10 pages of lines. 
• {feature}Aggregate multiple lines [requested]
• Now all lines from an invoice have the same importance. Especially by big invoices, it would be useful to aggregate the amounts from multiple lines under one. 
• {feature} Show the total amount across the lines [requested]
• When removing/adding lines, it would be useful to compare the total amount across the lines with the one from the header. 
• Check the UoM consistency between invoice line and linked purchase order line
• For the Invoice to be correctly processed, the two values must match. 
• Support for discounts [requested]
• as workaround, discounts can be entered as separate lines
• Transfer invoice
• 
  
• Automation
• {parameter} Auto invoice cleanup
•  automatically cleans up the transferred invoices and voided invoices older than 180 days every day [1]
• Use continuous learning 
• select this option to turn on the continuous learning feature
• learns from the corrections made by the AP clerk on a previous instance of the same invoice [1]
• records the mapping relationship between the invoice context and the derived entities [1]
• the entities are automatically derived for the next time a similar invoice is captured [1]
• {missing feature} standard way to copy the continuous learning from UAT to PROD
• {feature} migration tool for continuous learning knowledge
• allows us to transfer the learning knowledge from one environment to another [1.6.0.x]
• Confidence score check
• for the prebuilt model the confidence score is always the same 
• its value is returned by the AI Builder service
• confidence score can only be improved only when the customer prebuilt model is used 
•  it can be increased by uploading more samples and do the tagging accordingly
• a low confidence score is caused by the fact that not enough samples with the same pattern have been trained
• {parameter} control the confidence score check [1.1.0.32/10.0.39]
• Manage file filters

User Interface

• Side-by-side view [by design]
• 
  
• History logs [1.0.1.0]
• supported in Received files and Captured invoices
• help AP clerks know the actions and results in each step during invoice processing 
• Navigation to D365 F&O [1.0.1.0]
• once the invoice is successfully transferred to D365 F&O, a quick link is provided for the AP clerk to open the Pending vendor invoice list in F&O
• Reporting
• {missing feature} consolidated overview across multiple environments (e.g. for licensing needs evaluation)
• {missing features} metrics by Legal entity, Processing status, Vendor and/or Invoice type
• {workaround} a paginated report can be built based on Dataverse

Data Validation

• [Invoice Capture] derivation rules 
• applied to ensure that the invoices are complete and correct [1]
• {missing feature} derive vendor using the associated email address
• {parameter} Format purchase order 
• used to check the number sequence settings in D365 F&O to format the PO number [1]
• {parameter} Derive currency code for cost invoice
• used to derive the value from invoice master data in D365 F&O [1]
• <-- the currency code on PO Invoices must be identical to the one on PO
• {parameter} Validate total sales tax amount 
• validates the consistency between the sales tax amount on the Sales tax card and the total sales tax amount, when there's a sales tax line [1]
• {parameter} Validate total amount 
• confirm alignment between the calculated total invoice amount and the captured total amount [1]
• [D365 F&O] before workflow submissions [requested]
• it makes sense to have out-of-box rules 
• currently this can be done by implementing extensions
• [D365 F&O] during workflow execution [by design]

Dynamics 365 for Finance [aka D365 F&O]

• Attachments 
• {parameter} control document type for persisting the invoice attachment in D365 F&O [1.1.0.32/10.0.39]
• Invoice Capture
• {parameter} select the entities in scope
• {parameter}differentiate by Invoice type whether Vendor invoice or Invoice journal is used to book the invoices
• {parameter} Transfer attachment
• Fixed Assets
• {missing feature} create Fixed asset automatically during the time the invoice is imported
• Vendor Invoice Journal 
• {missing feature} configure what journal the invoice is sent to
• the system seems to pick the first journal available
• {parameter} control journal name for creating 'Invoice journal'  [1.1.0.32/10.0.39]
• {missing feature}grouping multiple invoices together in a journal (e.g., vendor group, payment terms, payment of method)
•  Approval Workflow
• {missing feature} involve Responsible person for the Vendor [requested]
• {missing feature} involve Buyer for Cost invoices [requested]
• {missing feature} differentiator between the various types of invoices [requested]
• {missing feature} amount-based approval [requested]
• Billing schedule
• {feature} integration with Billing schedules
• {feature} modify or cancel Billing schedules
• Reporting
• {missing feature} Vendor invoices hanging in the approval workflow (incl. responsible person for current action, respectively error message)
• {missing feature} Report for GL reconciliation between Vendor invoice and GL via Billing schedules
• {missing feature} Overview of the financial dimensions used (to identify whether further setup is needed)

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Resources:
[1] Microsoft Learn (2023) Invoice capture overview (link)
[2] Yammer (2023) Invoice Capture for Dynamics 365 Finance (link)
[3] Microsoft (2023) Invoice Capture for Dynamics 365 Finance - Implementation Guide

Acronyms:
AI - Artificial Intelligence 
AP - Accounts Payable
F&O - Finance & Operations
LE - Legal Entity
PO - Purchase Order
UoM- Unit of Measure

💫ERP Systems: Microsoft Dynamics 365's Vendor Invoices Processing (Setup Areas)

ERP Systems

Invoices can be set up to be imported automatically in Dynamics 365 for Finance and Operation (D365 F&O) via Invoice Capture (see process). Besides the Invoice Capture-related set up, there are several areas related to Vendor invoice's processing:

General Ledger

Accounts for automatic transactions need to be defined at least for the 'Vendor invoice rounding off' and 'Rounding variance', respectively for the 'Exchange rate gain' and 'Exchange rate loss', if this wasn't done already.

To facilitate accounts' reconciliation and reporting, one can enable a Batch transfer rule for the Source document type 'Vendor invoice' and thus one journal is used for each Vendor invoice. This also makes sure that the Description from Invoice will be taken over in the Journal, which facilitates accounts' reconciliation.

Subscription Billing

In case one needs to defer the amounts over a time interval (e.g. x months), as it's the case for prepayments, the integration with Subscription Billing on the Vendor side in F&O seems to work with minimal configuration. A Billing schedule is created for each Invoice distribution and can be modified or cancelled after the Invoice is posted, if needed.

If your organization uses Subscription Billing also for Accounts Receivables (AR), one might need to compromise on the setup because the same parameters are used for both modules. 

In what concerns accounts' reconciliation, there seems to be a 1:1 mapping between the Schedule line and the General Ledger (GL) posting, a table with the mapping between the records being available. One can build thus a Paginated report to display the mapping between AP and GL, if the infrastructure is in place (e.g. by building a data lakehouse/warehouse based on F&O, see post). 

Fixed Assets

One can enable the creation of Fixed assets by checking the "Create asset during product receipt or invoice posting" radio button in Fixed assets parameters.

The feature "create the fixed asset automatically during the time of invoice import" for PO-based Invoices (with "Create Fixed Asset" flag set at line level) doesn't seem to be supported yet.

Vendor Invoice Journals

Before Invoice Capture, Vendor invoice journals were helpful for posting summarized cost invoices that are not associated with POs (e.g. expenses for supplies or services). One can still use this approach, however if the line-based details are important, then it makes sense to use Pending vendor invoice with Service items or Procurement categories.  

A single Vendor invoice is created as one Vendor invoice journal. 

Organization Administration

When using workflows, setting the same language for all LEs can reduce the amount of redundant information maintained in the workflow(s), otherwise the texts need to be provided for each language. 

Default descriptions can be enabled for Purchase orders' invoice ledger and vendor to carry the same description entered Pending Vendor Invoices in Invoices and Journals. The functionality works also for Cost invoices.

Ideally, Invoice's description should have been maintained in Invoice capture and/or Microsoft should have provided a default description also for it. 

System

Unless there's a requirement to post manually the journals from subledger to GL, a batch transfer for subledger journals must be created for each LE.

One can enable email notifications for the users participating in workflows and use workflow delegations for the intervals the respective users are on leave. 

All users participating in the workflow must be available also as active employees. It makes sense to do latest when the integration goes Live. Moreover, the Users need to have the appropriate permissions for the roles they have in the process.

Vendor Invoice Automation

There's further functionality available under the 'Vendor Invoice Automation' label (see [1], [2]), though the following are the most important ones: 

• Automatically apply prepayments to vendor invoices
• Automatically submit imported invoices to the workflow system.
• Match product receipts to pending vendor invoice lines.

Recurring Vendor Invoice Templates

Microsoft introduced with 10.0.38 PU a new feature called 'Vendor invoice templates', which allows creating recurring vendor invoices without the need to enter all the vendor invoice information for each separate invoice (see [3]). There seems to be no information available whether any integration between this feature and Invoice Capture will be supported.

E-Invoicing

EU countries need to enforce the Directive 2014/55/EU for Vendor and Customer invoices. The directive requires that the electronic exchange of invoice documents between suppliers and buyers to occur over government-held third-party solutions. Each country has its own system(s) and regulations with different scope and timelines. Some countries have already requirements for 2024, respectively 2025 and there are similar projects in US and other countries. 

Even if Microsoft started this year (2023) to provide country-specific integrations for e-Invoicing, for the moment there seem no information available on how e-Invoicing will integrate with Invoice Capture.

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Resources:
[1] Microsoft Learn (2023) Vendor Invoice Automation (link)
[2]Microsoft Dynamics 365 (2023) The Future of Finance: Unlocking the Benefits of Accounts Payable Automation (link)
[3] Hylke Britstra (2023) Recurring vendor invoice templates (link)
[4] Dan Edwards (2023) AP Automation at DynamicsCon (link)

💫ERP Systems: Microsoft Dynamics 365's Invoice Capture (Setup Areas)

ERP Systems

When implementing the Invoice Capture process, there are several setup areas that need to be considered into the Power App (Channels & Mapping Rules), some that need to be done in Dynamics 365 for Finance and Operations (D365 F&O) and impact the integration with the Power App (Expense types/Procurement categories, Financial dimensions, Approval workflow), respectively setup that concerns only D365 F&O but still important. In addition, there are also overlapping features like Recurring Vendor Invoice Templates and E-Invoicing.

This post focuses on the first two types of setup areas, the rest following  in a second post. 

Channels

In the digitalization era, it's expected that most of the Vendor invoices are received by email or an integrated way (see e-Invoicing). However there can be also several exceptions (e.g. small companies operating mostly offline).

In Invoice Capture can be defined one or more channels for Outlook, SharePoint or OneDrive on which Invoices can be imported in the App. In a common scenario, depending on the number of mailboxes intended for use, one or more channels can be set up for Outlook. Power App listens on the respective channels for incoming emails in the Inbox, in a first step processes the emails by importing all the attachments (including signature images), while in a second step processes all the documents that look like an Invoice (including Receipts) and extracts the metadata to create the Invoice record. The Invoices received in hard-paper format can be scanned and sent to one of the internal mailboxes, respectively imported manually in Invoice Capture. 

More likely, there will be also a backlog that can be imported via SharePoint or OneDrive, which is more convenient than resending the backlog by email. In the end it should make no difference for the process which channels is used as long as the Invoices are processed in a timely manner. It should make also no difference if for example in UAT were used other channels than in Production. For testing purposes it might be advantageous to have more control over which Invoices are processed, while the UAT could follow the same setup as Prod, which is generally recommended.

Mapping Rules

The mapping rules allow on one side to set default values based on a matching string checked against several attributes (e.g. Company name, Address or Tax registration number for Legal entity, Item number for Item, Item description for Expense type). Secondly, they allow to also define a configuration for a rule, which defines what fields are mandatory, respectively which Invoice types are supported, etc.

The mapping rules will not cover all scenarios, though it's enough if they cover a good percentage from the most common cases. Therefore, over time they are also good candidates for further optimization. Moreover, because Invoice Capture remembers the values used before for an instance of the same Invoice, the mapping rules will be considered only for the first occurrence of the respective Invoice or whatever is new in its processing. 

If a channel was defined for each Legal entity, this seems to make obsolete the definition of mapping rules for it. Conversely, if the number of manual uploads is not neglectable, it still makes sense to define a mapping rule. 

Mapping rules for the Expense type seem to work well when Items' descriptions are general enough to include certain words (e.g. licenses, utilities). 

One can define mapping rules also for the Vendor accounts and Items, though it's questionable whether the effort makes sense as long as the internal Vendor names and Product numbers don't deviate from the ones used by the Vendor itself.

Expense Types

Invoice Capture requires that either the Item or the Expense type are provided on the line. For PO-based invoices, an Item should be available. Cost invoices can have Items as well and they can be used on the line, though from the point of view of the setup it might be easier to use Expense types. It's the question whether the information loss has any major impact on the business. There are also cases in which the lines don't bring any benefit and can be thus in Invoice capture deleted. 

At least for Cost invoices, the Expense types (aka Procurement categories in Dynamics 365) defined can considerably facilitate the automatic processing. D365 F&O can use the Procurement category to automatically populate the Main Account in the Invoice distributions. The value is used as default and can be overwritten, if needed. 

Having for example a 1:1 mapping between Procurement categories and Main accounts, respectively the same names can make easier the work of AP Clerks and facilitate the troubleshooting.

Conversely, one can define an additional level of detail (aka an additional segment) for reporting purposes. This implies that multiple categories will point to the same Main account, which can increase the overhead, though the complexity of the structure can be simplified by using maybe a good naming convention and a consolidated Excel list with the values. The overhead resumes mainly when dealing with the first instance of an Vendor invoice.

On Procurement categories can be defined also the default Item sales tax groups (a 1:1 mapping) which can be overwritten as well. For the categories with multiple Items sales tax groups, one should decide whether the benefit of providing a default value outweighs the effort for adding the value for each Invoice line. 

Defining upfront, before the Go Live, a good hierarchical structure for the Procurement categories and the mappings to the Main accounts, respectively to the Item sales tax groups can reduce the effort of maintaining the structure later and reduces the reporting overhead. 

Financial Dimensions & the Vendor Invoice Approval Workflow

Besides their general use, the Financial dimensions can be used to implement an approval process on D365 F&O side by configuring an expenditure reviewer (see [2]) and using it in the Vendor Invoice Approval workflow, respectively of setting up the financial owners for each dimension in scope. Different owners for the Financial dimensions can be defined for each Legal entity via Legal entity overrides. From what it seems, notifications are sent then to the override as well to the default owner. 

Starting with the 1.1.0.32 (07-Nov-2023) version of Invoice capture, respectively the 10.0.39 version of D365 F&O (planned for Apr-2024), 3 financial dimensions (Cost center, Department and Legal Entity) are supported directly in the App. This would allow us to cover the example covered in [2]). This reduces the need for maintaining the values in D365 F&O. 

Unfortunately, if the approval process needs to use further dimensions (e.g. Vendor, Location) or attributes (e.g. Invoice responsible person) in the approval, one needs either to compromise or find workarounds. If there's no Purchase order as in the case of Cost invoices, involving the actual Buyer is almost impossible. For such extreme cases one needs more flexibility in the approval process and hopefully Microsoft will extend the functionality behind it.

The approval processes needed by customers require occasionally a complexity that's not achievable with the functionality available in D365 for F&O. The customers are forced then either to compromise or use external tools (e.g. Power Automate) for building the respective functionality. 

One should consider defining default Financial dimensions on the Vendor, the respective values being used when generating the Invoice in D365 F&O. Defining Financial dimensions templates can help as well when the costs need to be split across different Financial dimensions based on percentages. 

In case the financial dimensions differ across a same Vendor's invoices, one can request from the Vendors to provide the respective information on the Invoice. 

Organization Administration

Cost invoices can work without providing a Unit of Measure (UoM) in Invoice capture, however one should consider using an UoM at least for aesthetic purposes in reporting. On the other side, this can complicate the setup if the same UoM is used for other purposes. 

Vendor Invoice Automation

To be able to process automatically the Vendor invoices once they arrived in D365 F&O, it would useful to maintain the attributes which are modified manually in D365 F&O directly in Invoice Capture. The usual fields are the following:

• Invoice description (header)
• Financial dimensions 
• Sales item tax group

Master Data Management

There are master data attributes which even if they are not directly involved in the process, they could make process actor's life a bit easier. It can be the case of the Responsible person and/or the Buyer group, which would allow the AP Clerks to identify the Cost Center and Department related to the Invoice. Maintaining the external Item descriptions for Vendors can help as well in certain scenarios. 

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Resources:
[1] Microsoft Learn (2023) Invoice capture overview (link)
[2] Microsoft Learn (2023) Configure expenditure reviewers (link)