What is commitment accounting?

Cash-Flow Cost Control Project controlling

What is commitment accounting?

Every time you order something from a supplier, you make a commitment to pay in the future.

Since accounting systems are designed to look backwards, these are of little help when it comes to tracking financial commitments.  The consequence is often lack of control or ad hoc compensating manual processes to regain control.

financial commitments
Figure 1 Not tracking financial commitments (rear-view mirror controlling)


In this article we will describe what commitment accounting is, the benefits you will get from tracking financial commitments and how your business can become forward-looking.


Commitment accounting – definition

First, a financial commitment is defined as:

A financial commitment is a commitment to an expense at a future date

Source: Market Business News, financial glossary


What are the benefits of tracking financial commitments?

There are many advantages of tracking financial commitments, the main ones being

  1. Financial discipline
  2. Clear supplier agreements
  3. Real time cost insight
  4. Team efficiency
  5. Become forward-looking

See how your business can benefit from tracking financial commitments here.

CostTracker is a cloud-based purchase order system designed to make cost control easy. The system includes unique features for cost control. CostTracker is designed to be easy to use and get started with and can be used a stand-alone or integrated with your accounting software.

CostTracker provides cost control for hundreds of companies worldwide.

See also:

Tracking committed cost – how it benefits your business.

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