A commitment is money you have agreed to spend but haven’t been billed for yet. Subcontracts and purchase orders are the two common types. Committed cost equals the original commitment plus approved commitment change orders; remaining commitment equals committed cost minus what has been invoiced against it.
Why it matters
Actual cost alone understates where a job is headed. If you’ve signed a $2M subcontract and only $400K has been billed, $1.6M of cost is already locked in. Tracking commitments is how you see overruns at signing, not months later at the invoice. It’s also the basis for catching invoices that exceed what was agreed.
Worked example
On Riverside Medical Center, PO-118 has a remaining commitment of $42,050. Invoice INV-4471 arrives for $48,200, exceeding the remaining commitment by $6,150 ($48,200 minus $42,050). That gap is an unapproved change, a pricing error or an over-bill, and it should be resolved before the invoice is paid. (Illustrative sample data.)
Common mistakes
- Issuing work verbally and writing the PO after the invoice shows up, so the commitment never protects you.
- Not updating commitments for approved subcontract change orders, which makes remaining commitment wrong.
- Forecasting cost-to-complete without counting open commitments.
How os.construction handles it
We’re building commitments into the same record as the budget and AP, so each invoice is checked against remaining commitment as it comes in. We’re designing the exception workflow with founding contractors.