{"id":27608,"date":"2024-09-11T13:26:42","date_gmt":"2024-09-11T11:26:42","guid":{"rendered":"https:\/\/clockify.me\/blog\/?p=27608"},"modified":"2026-04-09T09:02:30","modified_gmt":"2026-04-09T07:02:30","slug":"budgeting-methods","status":"publish","type":"post","link":"https:\/\/clockify.me\/blog\/business\/budgeting-methods\/","title":{"rendered":"Keep Your Business Afloat With These Budgeting Methods"},"content":{"rendered":"\n

Travel costs, office supplies, software, marketing \u2014 the list of business expenses can seem endless. Add an unpredictable income to the mix, and you have a recipe for a financial disaster.<\/p>\n\n\n\n

If you\u2019re struggling with overspending or haven\u2019t built a sufficient emergency fund for your business, your budget management strategy needs a re-evaluation.<\/p>\n\n\n\n

Here\u2019s an overview of the popular budgeting methods you can implement to better manage your expenses and reach your financial goals.<\/p>\n\n\n

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\"Budget<\/figure>\n<\/div>\n\n\n

#1: Minimize overspending with the Envelope Method<\/h2>\n\n\n\n

Envelope Budgeting means you sort expenses into categories. Theoretically, you withdraw all cash each month, categorize it, and put it in envelopes.<\/p>\n\n\n\n

For personal use, physical envelopes could work, but a business needs a digital envelope system. It can be in the form of separate accounts or a budgeting app<\/strong>.<\/p>\n\n\n\n

By categorizing your expenses and determining how much you should spend on each expense category, you\u2019ll likely curb your spending habits.<\/p>\n\n\n\n

Below are some of the most common budget categories<\/strong>:<\/p>\n\n\n

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\"Envelope<\/figure>\n<\/div>\n\n\n
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Apart from being a powerful time and invoicing app, Clockify by CAKE.com<\/a> can help with expense tracking. It has features that allow you and your team to add and categorize all expenses.<\/p>\n\n\n

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\"Expenses\"
Expenses in Clockify<\/figcaption><\/figure>\n<\/div>\n\n\n

By creating expense categories, you can easily track costs and determine how much to allocate to each budget category.<\/p>\n\n\n\n

Track expenses with Clockify<\/a><\/p>\n\n\n\n

NOTE:<\/strong> If you deactivate a team member in your Clockify workspace, the team member is prevented from logging in, but their paid seat remains open for a replacement. The total number of paid seats in your workspace stays the same. Read more about Clockify subscription issues<\/a>.<\/p>\n\n\n\n

#2: Maintain financial stability with the Profit First Budget Method<\/h2>\n\n\n\n

Profit First is a budgeting technique that focuses on profit<\/strong> rather than on revenue. Revenue encompasses all the income generated from sales of goods or services. On the other hand, profit is what is left when you deduct expenses.<\/p>\n\n\n\n

This budgeting method is based on behavioral psychology principles like Parkinson\u2019s law<\/a>. According to this principle, \u201cwork expands so as to fill the time available for its completion.\u201d <\/p>\n\n\n\n

Although Parkinson\u2019s law is geared toward time management, it can also be applied to budgeting. In other words, you\u2019re likely to spend all the money you have at your disposal if you don\u2019t categorize it according to purpose.<\/p>\n\n\n\n

Therefore, setting aside a specific amount of money to go toward your business\u2019 profit will ensure a budget surplus each month.<\/p>\n\n\n\n

The Profit First Budget Method requires you to subtract profit from sales and use the remaining amount on expenses. The formula looks like this:<\/p>\n\n\n\n

Revenue \u2013 Profit = Expenses<\/strong><\/p>\n\n\n\n

To properly implement this budgeting system, we recommend separate accounts. You can find examples of separate accounts in the following illustration:<\/p>\n\n\n\n

\"Profit<\/figure>\n\n\n\n
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This technique can be compared to some other budgeting methods, like the Envelope Method, but its main goal is to always set profit aside first.<\/p>\n\n\n\n

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\ud83d\udca1 CLOCKIFY PRO TIP<\/strong><\/p>\n\n\n\n

If you\u2019re a restaurant owner, check out this article that breaks down how to create a budget for a restaurant:<\/p>\n\n\n\n