Research from Vlerick Business School indicates that artificial intelligence (AI) consistently outperforms humans in financial planning when strategic guidelines are implemented. Companies leveraging AI for budgeting processes achieve notable improvements in both accuracy and efficiency compared to traditional human decision-making. The study aimed to discern AI’s effectiveness in corporate budgeting and its alignment with long-term business strategies, as well as to evaluate how its financial decisions stack up against human management.
The research, led by Kristof Stouthuysen, a Professor of Management Accounting and Digital Finance, and PhD researcher Emma Willems, focused on two budgeting approaches: tactical and strategic. Tactical budgeting involves making quick, data-driven financial decisions to enhance immediate performance, such as adjusting spending based on market trends. In contrast, strategic budgeting takes a broader approach, concentrating on future planning and aligning resources with the company’s vision.
Findings revealed that AI excels in tactical budgeting tasks, including cost management and resource allocation. Nonetheless, human insight remains critical for accurate and strategic long-term financial planning. The researchers conducted a management simulation where seasoned managers allocated budgets for a hypothetical automotive parts company, comparing their decisions to those generated by an AI algorithm using the same financial data.
The results showed that AI could optimize budgets effectively when a company’s strategic financial planning was well-defined. However, it faced challenges when key performance indicators did not align with financial objectives. Stouthuysen and Willems emphasized the need for collaboration between humans and AI, suggesting that companies can gain a competitive edge by leveraging AI for tactical budgeting while retaining human oversight for strategic planning.
Overall, the study challenges the notion that AI could wholly replace human roles in budgeting. Instead, it advocates for a balanced approach that assigns tasks based on the strengths of both AI and human intuition, enabling organizations to enhance financial performance and achieve sustainable growth.