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Overview

One of the ways to back up your virtual machine(s) is to use the Mac built-in Time Machine Utility; it's one of the easiest ways to keep your computer safe.

Parallels Desktop for Mac includes improved integration with Time Machine. 
When backing up the virtual machine, it will only backup the recent changes (the latest snapshot), but not the whole virtual hard drive.
Thus, the backup process will take less time and use less space on your Time Machine storage device.

To enable improved integration with Time Machine, please go to Virtual Machine Configuration, choose Options and hit Backup.

Select "Optimize for Time Machine" in SmartGuard menu.

If you do not want your virtual machine to be backed up by Time Machine, you need go to Virtual Machine Configuration --> Options --> Backup and put a checkmark on “Do not back up with Time Machine”.

NOTE: In order to restore your Virtual Machine from Time Machine backup, you need to check the location of PVM file.
Usually it is /User/Documents/Parallels or /Users/Shared/Parallels/
And follow instructions in Apple KB article HT1427