What is a Budget Analyst?
Budget Analyst is a professional data-oriented person who organizes and allocates various financial resources (Income from business/profession, interest income from bank deposits, profits from trading in stocks or shares) by monitoring each spending on an estimation basis and then produces probable surplus/deficit from the said calculations.
Types of Budget Analyst
They may be involved in various budgets in the organization. He may perform the role of only a specific area. Likewise, various components are as under:
#1 – Financial Budget Analyst
The main job is to look for probable (expected) profit that will be left with the organization after considering all sorts of expenses.
#2 – Production Budget Analyst
This job is concerned with what costs are involved in the production of an item (i.e. Finished Goods). They get a list of all the components required for production, from the production manager of the organization. They also require information about all the overheads involved in the production process. Finally, they arrives at Gross Profit from each product
#3 – Division/Branch Budget Analyst
They do the same as a financial budget analyst does. But they are concerned only with 1 branch of the organization, and not the whole organization. This person is basically a branch manager.
#4 – Cash Flow Budget Analyst
The main job is to estimate the net cash flows from the operational, investments & financing activities of the organization. They have a responsibility to allocate the cashflows to different activities & to arrive at net cash that will be left with the organization.
Examples of Budget Analyst
Below are a few examples.
#1 – Financial Budget
#2 – Production Budget (Units to be Produced)
#3 – Cash Budget
Advantages of Budget Analyst
Some of the advantages are as follows:
- The Manager can project the expected costs, revenues, productions required based on various budgets prepared by the Budget Analyst.
- With the help of a budget, the managers can also project the cost that may be required for hiring personnel. Budgets prepared by Analyst helps in planning the recruitments & labor training so that the unwanted labor turnover can be reduced.
- Production costs can be estimated. Unrequired wastes can be identified in the budget process itself.
- They assist in the speedy decision-making process for Top Managers of the organization.
- They can save the organization from unavoidable shocks since he makes provision for unexpected cash outflows
- They help in the bifurcation of expenses as per various departments. It helps to identify the department to which the cost is related. Hence, measures to reduce the cost will be effective
- They also help in the bifurcation of cost into fixed cost, variable cost, and semi-variable costs. So, management can decide which costs to focus on. The basis for variable costs is also visible in the budgets prepared by Analyst (such as percentage of sales, per unit basis, etc.)
Disadvantages of Budget Analyst
Some of the disadvantages are as follows:
- An underlying assumption for expenses can deviate from actual figures. If the deviation is minimum, then it is accepted. If the deviation is high enough, it may result may be horrible.
- High estimation may result in disapproval of the decision to manufacture a product. It may mislead the decision-making process.
- The budget Analyst needs to have a huge knowledge of the operations of the entity. Their work would not be of any use if they have no knowledge of the sector in which the entity is operating.
- They need to revisit the budgets many times. Thus, flexible budgets analyst always has an up-hand to revise the estimates based on new information.
- Flexibility is working is required. Because estimates are bound to change during the year.
- Regular updating of knowledge is required for the effectiveness
They need to have comprehensive knowledge. He needs to consider a lot of things before finalizing the work. He is treated as support-hand of the Top Managers of the organization. Thus, he is bombarded with responsibility for the accuracy (of facts), reasonableness (of assumptions) and completeness (of all activities required the process for which the budget is to be prepared).
This has been a guide to what is a budget analyst. Here we discuss types and examples of budget analysts with a balance sheet along with advantages and disadvantages. You can learn more about financing from the following articles –