How Can AI Help with Budgeting and Capital Allocation?
A recent Harvard Business Review article suggests that AI might be replacing some of the “most elite consultants” when it comes to making major business decisions. As the financial industry is moving toward more passive management, AI can assist corporate leaders in making critical business decisions, including budgeting and capital allocation.
High Price of the Corporate Consulting Industry
In 2016, the corporations in the United States spent more than $58.7 billion on management consulting services. This amount was 7.1 percent higher than the previous year. The financial industry spent the most, $14.8 billion, an increase of 8.3 percent from 2015.
Most of what businesses are paying for with consulting services is data analysis and presentation. Consultants gather data, clean it up, process it and interpret it. Then they make a nice presentation, usually involving Spreadsheets or even PowerPoint. Consultants are very skilled at what they do, and what they charge reflects this. However, when it comes to gathering data, scrubbing what needs to be scrubbed, and processing and interpreting the results, AI is usually more efficient, and less costly than human corporate consultants.
Bringing Value to Budgeting and Yearly Capital Allocations
Just like individual investors often do, corporations can fall into a rut with making the same decisions year after year despite changing markets. Yearly capital allocations are often made the same way each year. This might work well for some parts of the business, but other areas may suffer through inefficient budgeting of capital.
Using AI, corporations can analyze where increases or decreases can be made throughout their business that will affect their budgeting and capital allocations. While they could pay money to bring in a consultant, basically they are hearing the consultant’s interpretation of the data that took him or her numerous hours to gather, process, and interpret.
AI can allow corporate leaders to make more accurate decisions regarding budgeting and yearly capital allocations. The analysis provided through AI is fact-based on corporate data and not open to possible biased opinions or a one-size-fits-all approach that has worked in the past, but in fact might not be applicable going forward.
