Budgets and reservations

You’ll need: Envelope budgets, Payment reservations — if you cannot see these, the module may be switched off for your business or outside your permissions. An administrator can change either.

Two tools for controlling money before it is spent, rather than reporting on it afterwards.

Envelope budgets

An envelope budget is money set aside for a purpose. It has a name, a currency, and a tracking approach, with a goal amount and a threshold minimum amount.

It records an expense frequency and a deadline, and holds spend figures per period — yearly, monthly, weekly and daily.

The idea is old and it works: rather than one pot everybody draws from and a monthly surprise, money is allocated to purposes. Fuel has an envelope. Rent has an envelope. When an envelope is empty, the answer is not “the account still has money” — it is that this purpose has had its allocation.

The threshold minimum is the useful half. It is the level at which somebody should be told, and it turns a budget from something reviewed monthly into something that warns you while there is still time to act.

Payment reservations

A payment reservation sets money aside for a specific commitment that has not yet been paid.

The problem it solves is familiar: the bank balance says two million, so a manager approves a purchase — not knowing that one and a half million is already committed to salaries on Friday. The balance was accurate and the decision was still wrong.

A reservation makes the commitment visible before it becomes a payment, in the same way a sales order reserves stock before it ships. It is the cash equivalent of the difference between on-hand and available.

The pattern across FeePrime

You have now met this idea three times:

   stock    on-hand      vs  available (less reserved)
   money    balance      vs  uncommitted (less reserved)
   supply   incoming     vs  actually here

In each case the raw figure is true and the useful figure is smaller. Acting on the raw one is how a business promises what it does not have — goods, or money.

Neither is a substitute for looking

Budgets and reservations are controls, not oracles. They only reflect what has been recorded: a commitment nobody entered reserves nothing, and an envelope nobody maintains is decoration.

They earn their keep in a business where several people spend, which is exactly the point at which the owner can no longer hold it all in their head.

Try it