AI Boosts Budgeting Efficiency, But Financial Strategy Needs Humans

Companies that integrate artificial intelligence into their budgeting processes are seeing significant improvements in efficiency and accuracy compared to those relying solely on human decision-making, according to new research by Vlerick Business School.

The researchers found that while AI excels at tactical budgeting tasks such as resource allocation and cost management, human insight, however, still remains crucial for long-term strategic financial planning. Their study challenges common misconceptions that AI can fully replace humans in budgeting, instead highlighting the need for a balanced approach.

The research was conducted by Kristof Stouthuysen, Professor of Management Accounting and Digital Finance, at Vlerick Business School and Emma Willems, a PhD researcher affiliated to Vlerick Business School, KU Leuven and Aalto University. The study sought to understand the role AI plays in corporate budgeting and how it compares to human managers in both the effectiveness and strategic alignment of financial decision-making.

The researchers focused on two key aspects of budgeting: tactical and strategic. Tactical budgeting involves data-driven decisions that optimise short-term performance. Strategic budgeting is more in-depth and focused on the long term.

To examine this, the researchers conducted a management simulation in which seasoned managers were asked to allocate budgets for a hypothetical automotive parts manufacturer. Their decisions were compared to those made by an AI algorithm using the same data.

The study found that AI consistently outperformed humans in optimising budget allocations when the strategic framework was clearly defined. But when key performance indicators (KPIs) were misaligned with strategic goals, AI struggled to produce the most effective results.

The findings suggest that AI can replace humans in tactical budgeting, where its speed and precision lead to more efficient outcomes. However, human oversight is essential in strategic planning to ensure that short-term financial decisions align with broader business objectives.

“As AI continues to evolve, companies that leverage its strengths in tactical budgeting while maintaining human oversight in strategic planning will gain a competitive edge,” say Willems and Stouthuysen. “The key is knowing where AI should lead and where human intuition remains indispensable.”

To optimise budgeting processes, the researchers state that companies should clearly define their strategic priorities and allow AI to handle tactical execution. By striking the right balance between AI-driven efficiency and human-led strategy, businesses can maximise financial performance while ensuring sustainable growth.

If you would like to receive the full research paper or speak with the researchers, please contact Peter Remon at BlueSky Education – peter@bluesky-pr.com +44 (0) 77 235 22830.