Following the permanent signing of Matthew Dolan earlier this month, Knott became City's second transfer of the summer this Friday when he penned a two-year deal at the Coral Windows Stadium.
The all-action midfielder will join the Bantams after an impressive spell on loan at fellow League 1 side Port Vale during the second part of last season.
The 21 year-old caught the eye with several high octane performances in the Valiants' engine room as Micky Adams' side went on to secure a ninth-placed finish in the table.
Parkinson admits he was aware of Knott's capabilities long before last season, however, and he feels the energetic midfielder is just what City needs as the Bantams boss looks to make changes for the new campaign.
Parkinson said: "He is a young player with a lot of energy and a lot of potential, and we are very much looking forward to working with him.
"He is a player who first came to my attention when he played against us while on loan with AFC Wimbledon during my first season at the club. We felt on that day that he looked a talented player and we've followed his progress since then.
"He went to Port Vale on loan last season and did really well for them. We needed reinforcements in our midfield area and he will provide good competition for that part of the team.
"He is an enthusiastic player, and one I think our supporters will enjoy watching.
"He also has a lot of ambition and hunger, which is what we want in the side.
"Billy is the second signing for us this summer - the first new face for us - and hopefully he's the first of many.
"We are looking to revamp the side a bit next season and get some fresh legs in there, and Billy will certainly help us with that."
With two midfielders in the bag already - Dolan and Knott - during the off-season, Parkinson readily admits he is still on the look out for further recruits to add to his growing squad for the new campaign.
The Bantams boss hasn't put a time-frame on when he is likely to secure any more signings but he has told supporters that work is continuing at a steady rate behind the scenes to try and bring the right players into the club.
Parkinson added:" There will be a new look to the team (for next season).
"I feel that a change is needed and we are working hard to achieve that.
"We have our plans in place. I am sitting down with the chairmen and David Baldwin (Director of Operations) again this week to go through potential targets and to decide which ones we want to move forward with.
"We know what the division is all about now and we are excited by the prospect of revamping the squad and giving a fresh feel to it.
"We know where we need to improve the squad and I am looking forward to the challenge of doing just that."