I use YNAB for budgeting (the older, non-subscription version). I made quilting a line item in my budget, so all purchases just go to that line. If I wanted to track it further, I could add notes (and those notes would then be searchable)-- like "notions", "fabric for x quilt", etc. I haven't bothered to do that though.
I only started actually budgeting to make sure I was meeting specific monthly savings goals (specifically, "saving for college" and "build new house"). Some months I go over what I'd ideally spend, but that's what overtime is for
Really though, I'm a "cover all the needs" first person, so make sure I have all my savings and bills covered first, then anything extra goes to "wants"-- like fancy cheese, good chocolate, a new "toy", fun fabric, etc. As long as I don't have to steal from the "important" funds to cover purchases, I'm not too worried about how much I'm spending on fabric.
The only thing I have noted separately is anything I buy specifically for donation blankets and quilts, so that I can better determine that as a deduction on my taxes.