TL;DR

The new Payables Agent in Dynamics 365 Business Central automates vendor invoice processing with AI. It scans invoices sent to a shared mailbox, creates draft purchase invoices, and lets users review before posting. Current features support PDF invoices, with future enhancements planned for purchase order matching and approval flows. The result: faster, more accurate AP workflows and less manual data entry.

Microsoft has introduced the Payables Agent for Dynamics 365 Business Central as part of Release Wave 2 in 2025. This new AI-powered tool streamlines accounts payable (AP) workflows by automating invoice processing, reducing manual data entry, and increasing accuracy. In this guide, we’ll look at the functionality Microsoft envisions, explore the current capabilities, walk through the setup, and see a live demo of how it works in practice.

Microsoft’s Vision for the Payables Agent

End-to-End Invoice Processing

According to Microsoft’s roadmap, the Payables Agent is designed to handle the entire invoice process. It starts when a vendor invoice enters the company and ends with a posted invoice inside Business Central. Once the invoice is received, the agent:

• Analyzes the document using generative AI.
• Identifies key details without requiring image capture training.
• Creates a draft invoice in Business Central for user review.
• Submits the approved draft for further processing and posting.

Future Enhancements

Microsoft envisions expanding the agent’s scope to handle multiple types of electronic documents beyond PDFs. Upcoming enhancements include:

• Purchase Order Matching: Automatically connecting incoming invoices with existing purchase orders in Business Central.
• Approval Flows: Allowing organizations to build in human oversight where necessary, giving teams flexibility to manage compliance and control.

Current Functionality

As of mid-2025, the Payables Agent can:

• Process PDF invoices.
• Use intelligent accounting to identify vendors and accounts from Business Central setup.
• Generate a draft purchase invoice for user review.
• Finalize and post the invoice once approved.

While the current features focus primarily on PDF handling, the foundation is already in place for broader adoption and future automation scenarios.

Setting Up the Payables Agent

Basic Configuration

The initial setup is straightforward. The most important step is creating a shared mailbox on your Exchange Server. Vendors send their invoices to this shared email address, which the Payables Agent monitors continuously. From there, the agent automatically picks up incoming invoices and prepares them for processing.

Currently, the setup options are minimal, but Microsoft plans to expand these in future releases to allow more customization and workflow control.

Demo: How the Payables Agent Works

Step 1: Sending an Invoice

After activating the Payables Agent, a vendor invoice is emailed to the shared mailbox. For this demo, an invoice from “American Distribution” was created and sent.

Step 2: Invoice Recognition

The Payables Agent scans the mailbox, identifies the new invoice, and organizes it into a processing thread. Each thread represents one invoice journey from receipt to posting.

Step 3: Review and Confirmation

The user opens the thread, reviews the attached PDF, and confirms that it is a valid vendor invoice. Once confirmed, the agent moves forward with draft creation.

Step 4: Draft Creation and Validation

The Payables Agent automatically creates a draft purchase invoice in Business Central. In this example, the agent correctly identified the vendor, assigned the proper account number, categorized the expense as overhead, and pulled in the correct line items.

Step 5: Finalization and Posting

After the draft is confirmed, the agent finalizes it into a purchase invoice. The user can then post it directly in Business Central, completing the process quickly and accurately.

Key Benefits

Efficiency and Accuracy

The Payables Agent reduces manual entry, saves time, and ensures invoices are captured with greater accuracy thanks to Microsoft’s generative AI.

Flexibility

With draft review and upcoming approval flow features, businesses can balance automation with human oversight, customizing the process to meet their governance needs.

Future-Proofing

By laying the foundation for purchase order matching and expanded document support, the Payables Agent is set to become a cornerstone of AP automation within Business Central.

Conclusion

The Payables Agent marks another step in Microsoft’s strategy to embed AI-powered agents into mid-market ERP systems like Dynamics 365 Business Central. By simplifying and automating routine AP tasks, it allows finance teams to focus on higher-value work while still maintaining control and oversight where needed.

If you’re ready to explore how agents and Copilot can transform your finance processes, download our free guide to deploying Copilot in Microsoft 365 via the link in our video description.