The financial analyst industry can be complex. Analysts work in a variety of industries including banking, insurance and government. Budget analysts are responsible for planning how an organization will meet their financial needs. Financial analysts help make long-term financial decisions for their organization.
If those two roles sound pretty similar, you aren't far off! But when you get into the day-to-day, each job is a fair bit different.
The short version of the main difference between the roles is this: “Budget analysts are responsible for planning how an organization will meet their financial needs. Financial analysts are the visionaries and help make long-term financial decisions for the organization,” says Latricia Roundtree, instructor with Rasmussen's School of Business.
If you are interested in a successful career but aren't sure what the difference is between a budget analyst vs. financial analyst, read on to see the nuanced differences.
Main responsibilities of a budget analyst
Budget analysts create financial projections which assist leadership when planning for staffing, production, operations, expansion, etc… Roundtree explains. Businesses must budget just like individuals budget our personal finances. They have to ensure there is enough revenue coming in to cover both the expected and unexpected expenses their business might incur.
“Budget analysts need to possess skills such as paying close attention to details and strategic planning," Roundtree says. "If organizations do not budget appropriately then they could be headed towards liquidation."
She emphasizes that it’s important for a budget analyst to create approximate projections and present them to leadership. Budget analysts play a large role in guiding leadership as well as in assisting with operations inside the company. Their projections can determine which funding requests are granted.
Mistakes in the budget analysis can impact the company’s financial statements and affect their financial overview.
Example: budget analysts at work
Let's consider a department manager for a major retail company, Roundtree says.
The manager has sales goals to meet for the upcoming year and needs to create a budget. So the manager meets with the company's budget analyst. The budget analyst is responsible for making sure each department stays within the budget constraints needed for the company to meet their overall revenue goals.
The budget analyst will have created financial statements to guide the company toward meeting financial goals short-term and long-term. The department manager will receive a budget from the budget analyst and can then plan appropriately for their hiring needs, merchandising, marketing, etc...
Skills and knowledge for budget analysts
- Economic and accounting principles and practices
- Mathematics, particularly arithmetic, algebra, geometry, calculus, and statistics
- Forecasting and understanding the tools to predict future financial performance
- Cost control and implementing budget proposals
- Data analysis and the ability to collect, analyze, and interpret large datasets
- Software expertise such as Microsoft Excel® and financial modeling tools
Main responsibilities of a financial analyst
“Financial analysts analyze the numbers and make recommendations," Roundtree says. "This type of role requires excellent problem-solving and strategic planning skills. The analyst must be able to review financial statements and utilize the data to form recommendations for the company’s leadership.”
These recommendations might involve changes to the budget, reallocation of financial resources or investment strategies.
Where a budget analyst will be poring over the numbers from within the company, financial professionals look more at the big picture of cash flow, investments, market trends and more.
"Leadership depends on the financial analyst to help them with making critical decisions for the company," Roundtree says. "The financial analyst will evaluate the company’s financial statements such as the income statement, balance sheet and statement of cash flow. These statements provide insight into the company’s financial health overall.”
The work of a financial analyst is very important to a company's external investors as well, Roundtree points out.
Investors are concerned with how effectively the company manages their cash flow. Also, they want to ensure the company has enough cash on hand to sustain them long-term. If investors do not feel comfortable with how the company manages their cash flow, they might decide to minimize their risk by selling their shares.
Example: Financial analysts at work
Let's say Ron is a financial analyst for a large investment firm, Roundtree says. One of Ron's clients needs financial planning and is looking to expand their brick-and-mortar locations into three new territories. They ask Ron to assess the financial health of their company before deciding on this huge expansion decision.
Ron dissects and analyzes all of the company’s financial statements such as the income statement, balance sheet, and statement of cash flow. He also studies market trends. "This process enables him to determine if the company is financially healthy enough to sustain their current locations in addition to taking on three more territories.”
After evaluating financial data, Ron determines that the client company cannot support the expansion and presents his findings to their leadership.
Skills and knowledge for financial analysts
- Knowledge in accounting, financial analysis and economics
- Create financial models to simulate financial analysis scenarios
- Strategic planning and make recommendations based on financial data and financial reports
- Ability to analyze complex financial data reports and interpret economic trends
- Proficiency in financial software such as Microsoft Excel and financial modeling tools
Work environment differences between budget analysts and financial analysts
Even though budget analysts and financial analysts have some similarities, their career trajectory and office environments can be completely different.
“Budget analysts typically work in the private sector and for non-profits," Roundtree says. "They typically work in more structured environments and collaborate with department leaders."
Financial analysts, on the other hand, typically work in banks, investment firms and other financial hubs where they analyze financial data at the macro level.
"Some of them also earn commissions," Roundtree says. "They can advance into different opportunities with successful financial firms and hedge funds.”
Education requirements for budget analysts and financial analysts
If you are interested in one of these career paths, there are different educational requirements for each one.
“Budget analysts typically have a bachelor's degree in accounting," Roundtree says. "Accounting focuses on the day-to-day financial transactions for an organization."1 This sets you up well to do exactly that for an entire company.
"Financial analysts usually have a bachelor's degree in finance, accounting or business administration," Roundtree says. "They also earn certifications like Chartered Financial Analyst (CFA®) as well.”
Which role would suit you best?
Budget analysts and financial analysts definitely have some similar tasks. They both analyze data and draw conclusions, and they both present and communicate their findings.
But the nuances do make for quite different careers.
If you like the actualized numbers of accounting and prefer a certain amount of routine in your career year over year, the work of a budget analyst might be for you! Check out How to Become a Budget Analyst: Charting Your Course.
Or, if dealing with projections and sweeping changes in the market sounds more interesting to you, you might prefer the role of a financial analyst! Check out: What Does a Financial Analyst Do? Beyond the Numbers.
CFA® is a registered trademark of CFA INSTITUTE
1Rasmussen University’s Accounting Bachelor’s degree program is not designed to prepare graduates for any state-issued professional license or certification. This program does not meet all educational prerequisites for licensure as a Certified Public Accountant (CPA) in any state. This program has not been approved by any state board of accountancy or other professional licensing agency
