[GNC] envelope method, equity sub-accounts, cash vs. hybrid vs. accrual accounting

[Adrien Monteleone]

On 8/12/20 4:34 PM, doncram wrote:
> The documentation (GnuCash Tutorial and Concept Guide's
> chapter 14 on Budgets and its section on budget reports within chapter 10
> Reports)  doesn't go very far yet.

This is certainly true, as can be found many times on this list, 
"Contributions welcome."

> It doesn't mention any report showing
> Budget vs. Actual amounts for a given period, but I assume something like
> that must exist.

Did you run a report and investigate the options? Simply doing so would 
have saved you typing a paragraph.

The Budget report has the Actual and Difference columns as an option.

Percentages would be nice, but you'll have to export to a spreadsheet 
for now.


> About implementing some "envelope method" approach, I think that would be
> very radical, and that it would not be reasonable to devote programming
> effort to it before it was proven to be useful in real life. I haven't see
> it demonstrated in a spreadsheet-based example, even.  Are there such?

Don't be lazy. A simple web search will reveal plenty of example sheets 
you can download.

There are also apps which follow this. (you already know of YNAB) I've 
played with MoneyWell (Mac only) and while I like how it works, I kept 
coming back to GnuCash. Since both can integrate through import-export, 
I may investigate using MoneyWell for day-to-day expenditures and 
budgeting, then exporting into GnuCash for my full accounting. That 
would solve my data-entry 'virtual account dance' that is required to 
use this method with GnuCash alone.


> but it sounds like it is meant as a thing for a firm which does not have
> double-entry bookkeeping.  

I don't see how the envelope method of budgeting is somehow not 
compatible with double-entry. One split will be the expenditure, the 
other will be the appropriate envelope. Filling the envelopes involves 
splits between cash-on-hand and the various envelopes. Double entry is 
certainly not difficult or incompatible with the method.


If it is a thing, I suspect it is only a thing
> for entities like households that wouldn't be using GnuCash.

Again, I don't see this limitation at all. Why wouldn't a household use 
GnuCash and want to use Envelope Budgeting? Indeed, I suspect anyone who 
wants to see it added to GnuCash is indeed doing personal accounting.


With no use of credit/debit cards at all.

The aforementioned MoneyWell was designed specifically for this use 
case. While it can be used for someone who deals in cash only, it really 
is designed for people who rarely use physical cash. (might be why I had 
a difficult time sticking with it)


> snip < This
> is, like, motivational, not practical;

So, so, so many people following that advice a la Mr. Ramsey might 
respectfully disagree. This type of comment is getting into territory of 
discounting others and their use cases again, simply because they don't 
mimic your own.


I guess it could work for, like,
> the classic example of a rich woman having a big allowance from her
> husband, where her spending is really discretionary, when the husband gets
> mad and limits her to only spending from an allowance for the month given
> in cash, with resolve that he won't give her more.

That sentiment is not only short sighted of how others than yourself 
approach money and handle their finances, but also quite insulting. 
There are many families that operate with both spouses on-board with the 
envelope (and even cash-only) method.


Any nonprofit or small
> business is not like that, cannot operate that way even as an exercise for
> any period of time, but cause it just can't stop spending in a category
> when spending has to be done.

I could be mistaken, but I was taught managerial accounting/budgeting to 
aggregate expenses into broad categories for analysis. (the actual 
accounting is of course done with normal detailed accounts) That is 
essentially what the Envelope Method is for households. Rather than 
getting lost in the minutiae of each little account, it broadly groups 
categories of spending purposes for a broader and simpler overview where 
more impactful decisions can be made.

Looking at dirty details are useful to find out why a particular 
category might be out of whack that you are either just finding out is a 
problem, or because you're having a hard time keeping it in check. (and 
may expose the need to adjust your habits/decisions or budget) But that 
is an investigatory tool, while a bigger picture overview is easier to 
make decisions on and operate on a day-to-day basis to stick to the 
budget rather than a re-active line-item approach after the money is 
already out of the door.

And most certainly a small business can operate that way. (and 
non-profits) If the money isn't physically there and the business 
doesn't have access to debt, or chooses not to use it, then no matter 
how much spending 'has to be done' the manager/owner doesn't/can't do 
it. Yes, that might come with a negative impact in some form, but that 
doesn't mean the money gets spent no-matter-what. (In a worst case, this 
entity would be insolvent, but that non-spending decision may be made to 
avoid that condition.)

I've been involved with several small businesses and a couple of 
non-profits. Every single one didn't just 'spend' because it 'had to be 
done'. (where that argument might be made, like 'utilities', such 
spending *could* happen, because other parts of the budget were 
controlled well and subjected to *can't happen* if doing so would 
threaten the ability to meet 'mandatory' expenses)

Regards,
Adrien