What is a Budget Analyst?
Budget Analyst is a professional data-oriented person. He 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, multiple 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 need information about all the overheads involved in the production process. Finally, they arrive at Gross ProfitGross ProfitGross Profit shows the earnings of the business entity from its core business activity i.e. the profit of the company that is arrived after deducting all the direct expenses like raw material cost, labor cost, etc. from the direct income generated from the sale of its goods and services. from each product
#3 – Division/Branch Budget Analyst
They do the same as a financial budget analyst does. But they are concerned only with one branch of the organization, and not the whole organization. This person is a branch manager.
#4 – Cash Flow Budget Analyst
The main job is to estimate the net cash flows from the operationalCash Flows From The OperationalCash flow from Operations is the first of the three parts of the cash flow statement that shows the cash inflows and outflows from core operating business in an accounting year. Operating Activities includes cash received from Sales, cash expenses paid for direct costs as well as payment is done for funding working capital., investments & financing activities of the organization. They have a responsibility to allocate the cashflows to different activities & to arrive at net cashNet CashNet Cash represent the company's liquidity position and is calculated by deducting the current liabilities from the cash balance reported on the company’s financial statements at the end of a particular period. Analysts and investors examine it to have a better understanding of the company's financial and liquidity position. 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 benefits 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 calculated. 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 costFixed CostFixed Cost refers to the cost or expense that is not affected by any decrease or increase in the number of units produced or sold over a short-term horizon. It is the type of cost which is not dependent on the business activity., variable cost, and semi-variable costsSemi-variable CostsFixed and variable costs combine to form semi-variable costs. Because semi variable costs are influenced by both fixed and variable costs, they are also referred to as mixed 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 vast knowledge of the operations of the entity. Their work will not be of any use if they do not know the sector in which the entity is operating.
- They need to revisit the budgets many times. Thus, flexible budgetsFlexible BudgetsA flexible budget refers to an estimate which varies with the change in production activity or volume. Such a budget is more realistic and flares the managerial efficiency and effectiveness as it sets a benchmark for the actual corporate performance. 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 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 article 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 –