How to Use a (FREE) Digital Envelope Budgeting System for Your Business

By Ziwei Chen

Partner Marketing Manager, Relay

Envelope budgeting dates back centuries — you may remember your parents or grandparents keeping envelopes of cash in the house for "groceries, "gas", "rent", or other household expenses.

Fast forward a few hundred years and this method is just as relevant today, though it now takes the form of a digital envelope system rather than physical envelopes. Better yet, it’s no longer a system for households alone — you can apply it to your businesses as well!

In this article, you’ll learn about the digital envelope system from a small business lens, 👁 and how it can keep you accountable and within budget.

What is a digital envelope system?

The digital envelope system is a budgeting and money management technique that helps businesses stick to a budget and control spending. Categorize your expenses into multiple “envelopes” ✉️ — each representing a type of business expense, such as payroll, taxes, marketing, operating expenses, or owner’s pay — and set a budget for each expense based on your monthly revenue. 

The fundamental idea behind envelope budgeting is simple: since you are taking your revenue and portioning it out, you cannot spend more than what you earn 🙅‍♀️ (or what your business already has in its checking account). 

To illustrate how this can work in your small business, let’s walk through an example.

Example of the digital envelope method 

Let’s say you own a small marketing agency, Sally’s Social Studio, with three employees and a handful of contractors. You are a referral-only agency, currently renting out a small office space and also paying off a business loan. 

If you were Sally, how would you categorize and split your expenses? Let’s say Sally’s Social Studio’s revenue totals $10,000 a month. Given that information, she can potentially categorize her money into the following expenses: 

  • 💰 Payroll

  • 🏢 Rent

  • 🌐 Internet and utilities

  • 📚 Office supplies 

  • 🪣 Office cleaners

  • 🏦 Business loan

  • 💲 Taxes

Using the envelope budgeting method, Sally’s monthly budget can be further broken down as follows. 👇

Business Expense






Internet & Utilities


Office supplies (coffee, printer paper, ink, etc.)


Office cleaners


Business loan


Taxes (at 15%)


This way, Sally has $4,500 in her payroll envelope, $2,000 allocated to rent for the month, $100 in her internet and utilities envelope, $100 for office supplies, another $100 for the office cleaners, $1,500 to set aside to pay back her loan and $1,500 put away for tax season.

Origins of the envelope budgeting system 

Envelope budgeting originated as a cash budgeting technique used by families to help track household expenses. Families would determine how much money they would spend on a specific category of purchase (i.e. groceries, gas, mortgage, entertainment, etc.) and put physical cash in a labeled envelope to be used throughout that month. Each family member could then draw on these envelopes ✉️ when they go buy groceries, fill up the car or watch movies. 

Why has this technique stood the test of time? 🤔 Research has shown that people are more restrained and spend less when using cash compared to credit. Using cash triggers a pain response in your mind 🧠 that naturally deters you from overspending.  

The physical act of putting cash into envelopes also helps compartmentalize the money you actually have monthly so that you can avoid overspending; it’s a simple psychological trick. 

Although envelope budgeting has been around for centuries, finance guru Dave Ramsey is credited for its popularity and resurgence. According to Dave, when no physical warning or trigger is telling you when to stop, we tend to overspend.

This is where envelope budgeting comes in — when you have all your cash in one pot, it's hard to break down where your money is going or where you're overspending. When you compartmentalize your cash before spending, you stop and think about where each dollar is being spent each month. If you budget $500 for team-building activities into one envelope — you need to stick to it and not draw from another envelope.

If you are looking to apply envelope budgeting to your practice, there are a plethora of budgeting tools and modern bank features designed to help businesses better track their spending.

Cash vs digital envelope budgeting systems 

With the rise of credit cards 💳 and payment apps like Apple Pay, it’s no surprise that society is slowly moving toward a more cashless society. This makes the traditional cash envelope system outdated, especially for business owners. A recent study showed that the share of cashless businesses has more than doubled in the U.S. since 2020

Thankfully, the idea behind envelope budgeting can also work without physical cash. Today, there are countless digital envelope systems available — in the form of online banking platforms or budgeting apps — to help keep track of your spending in real-time. Let’s dive into each in a bit more detail. 👇

Banking built for envelope budgeting 

One way to integrate a digital envelope system into your finances is by using no-fee online banking that allows you to create envelopes or checking accounts for different categories of business expenses. 

Multiple bank account budgeting makes it easy to allocate the appropriate amount of funds into each envelope or checking account, track your spending, and make sure that you don’t go over budget.  

Here are some business banking platforms that allow you to use this methodology. 👇

Relay Financial — an online banking and money management platform

Relay - Digital Envelope System Integrated into Small Business Banking

First, let’s address the obvious — we wrote this article. But if you’re a small business looking for a banking solution that allows you to create multiple envelopes, then Relay is the best option for you. 

With Relay, users can compartmentalize their cash with up to 20 free, no-fee checking accounts. Better yet, these are all true checking accounts with unique account and routing numbers — not just abstract envelopes. 

Why does this matter? Unique accounting and routing numbers let you automate budgeting. You can actually set up or schedule different transactions between accounts — internal transfers, ACH payments, or wires.

But the advantages go a step further. In the context of envelope budgeting, a unique routing number will allow you to schedule recurring payments from a specific envelope. For example, say you have an account created for rent payments. With a unique routing number, you can set up a recurring transfer every month to pay off the $2,000 you owe for your office rent. The same can be done for internet bills and payroll from their respective checking accounts.

💡 Curious about where to stash your savings? Read our guide to the best small business savings accounts >

Qube Money — a cash envelope system without the physical cash 

Qube Money - Digital Envelope System

Qube Money is a mobile banking and budgeting app that makes managing money and sticking to a budget easy. They offer an FDIC-insured bank account through Choice Financial Group that allows you to create sub-accounts, called Qubes — their version of envelopes. From there, you are in charge of filling your Qubes and setting spending limits for each category.

When you’re ready to make a purchase, simply choose which Qube the money's coming from, ensure you have enough, and use the card associated with that Qube to make the purchase.

Apps for envelope budgeting 

Alternatively, if you don’t want to open a new checking account, you can still track your spending by using a budgeting app that integrates directly with your bank of choice.

Goodbudget — a digital budget tracker for the modern age

Goodbudget - Digital Envelope System

Goodbudget allows users to track their spending by allocating funds to different categories. With the free version, you can create up to 20 envelopes, track your debt and access the account across multiple devices. 

While the app doesn’t connect directly with your bank account, you can upload bank transaction files to ease your workflow. Budgets and expenses can also be added manually, allowing you to review all transactions and ensure accuracy.

Steps to set up digital envelope budgeting for business

Now that you know what envelope budgeting is and the tools available to you to implement it, let’s talk about how you actually start budgeting. 

Step 1: Determine your monthly business revenue

As a business owner, you should have an idea of how much revenue vs profit 💰 your business brings in monthly. If you don't, first determine that number. Once you understand your revenue and profit numbers, you’ll have a much better idea of how much cash you have available to use. 

Step 2: Create a list of fixed expenses 

Once you know how much revenue your business generates each month, the next step is to create a list of fixed expenses 📝 that are associated with operating your business. This may include utilities, payroll, marketing, taxes, or product costs. It all depends on your business and industry.

Step 3: Allocate budgets for each expense category

Determine how much you’ll allocate (by percentage or by cash amount) into each fixed expense type and how much you’ll have left over to go into an emergency or investment account. 

If you do have leftover money, you can spend it on variable business expenses such as an emergency fund, a business savings account, or a bonus fund to give back to your team.  👏🏽

Step 4: Use a digital envelope system to track expenses online

Use a business banking platform that allows you to set up multiple checking accounts or “digital envelopes”. Determine your expense categories and transfer allocations into each account. 

With a money management tool like Relay, you can take it a step further by setting up recurring monthly transfers 🔀 to ease your workflow.

Step 5: Track spending and only use the money in each envelope. 

Once you’ve determined your budgets and set up your digital envelope system, it's important to keep track of your expenses monthly. This will allow you to anticipate budget constraints and move money around if necessary. 

Benefits of the digital envelope system for small business 

Brings awareness to your spending

With envelope budgeting, you can see exactly how much cash 💵 you have left in each envelope, which forces you to plan out your budget every month. It holds you accountable to your planned budget by making it very difficult to overspend.

Easily identify overspending

With envelope budgeting, you can isolate problem areas and prevent issues in one department from affecting another. It’s easy to adjust the budget to account for unplanned circumstances by moving money between envelopes.

Makes bookkeeping easier

A major advantage of using a digital envelope system lies in the transaction history. Both banking platforms and budgeting apps will keep a detailed record of transactions, making it easier for your accountant and bookkeeper to keep the books 📚 up to date. Better yet, you’ll save everyone time if you’re able to give your bookkeeper direct access to view transaction history.

Digital envelopes are more secure 

Digital envelope systems are safer 🔒 because you aren’t carrying around physical cash. You don’t have to worry about losing money or worse, getting robbed. If an employee loses a card, you can quickly let your banking service provider know and make sure they block your card and issue you a new one. 

FREE digital envelope budgeting for small businesses 

Now that you know what the digital envelope system is and its benefits, it’s time to start applying it in real life! Envelope budgeting helps shift your mindset from reactive budgeting to proactive money management. 

If you’re looking for an online banking and money management platform that helps you implement this type of system for FREE, make sure to check out Relay — you can sign up here.

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