Committed Costs: The Number Missing From Your Job Report

The Report Says You Are Fine. You Are Not.

A job is 60% complete. The budget is $800,000. Costs to date are $460,000. The report shows you under budget and everyone relaxes.

What the report does not show: $390,000 of signed subcontracts and issued purchase orders that have not been invoiced yet. Add those and you are at $850,000 against an $800,000 budget, on a job that is only 60% done.

That $50,000 problem existed the day those contracts were signed. It just did not appear in any report, because job cost reports conventionally show what has been incurred, not what has been committed.

What Counts as Committed

A committed cost is money you are contractually obligated to spend but have not yet been billed for:

• Signed subcontracts — the full value, less what has been invoiced to date
• Issued purchase orders — the open balance on materials ordered but not delivered or not yet invoiced
• Equipment rental commitments — where you have agreed a minimum term
• Approved change orders to subs — which often get signed and then forgotten until the invoice lands

The useful equation on any job is not cost-to-date against budget. It is:

Costs incurred + open commitments + estimated remaining uncommitted = projected final cost

That figure compared against budget is the only version that tells you anything about the future.

Why Most Contractors Do Not Track It

Honestly, because it requires discipline that lives outside accounting. Committed costs only work if purchase orders are actually issued before material is ordered, and if subcontracts are entered into the system when signed rather than when the first invoice arrives.

In a lot of contracting businesses, the field orders material with a phone call and the paperwork catches up later. That is fast, and on a small job it is fine. On a $2m job it means you have no forward visibility at all.

Starting Without Overhauling Everything

You do not need a full procurement system to get most of the value. Start here:

• Enter every signed subcontract into the job budget the week it is signed. Value, cost code, and expected billing schedule. This alone captures the majority of commitment value on most commercial jobs.
• Require POs above a threshold. Pick a number — $2,500 is common — below which the field can order freely and above which a PO is required. You capture the big exposures without slowing down daily work.
• Log approved sub change orders immediately. These are the quietest source of overrun because they feel like small adjustments at the time.

Even a spreadsheet maintained weekly beats nothing, provided someone owns it.

Reading a Job Report With Commitments In It

Once commitments are visible, three patterns become obvious that were invisible before:

• Committed exceeds budget on a cost code. The overrun is already locked in. The only question is whether you can recover it through a change order.
• Committed is far below budget late in the job. Either work is not procured yet — a schedule risk — or the budget was overstated and there is margin to recognise.
• Commitments moving without change orders. Sub values creeping up while the contract value stays flat is margin walking out of the door.

Where It Connects to Your WIP

This is the part that matters beyond job management. Your WIP schedule depends on a cost-to-complete estimate, and a cost-to-complete built without knowledge of open commitments is a guess. Sureties and lenders read WIP schedules closely; one built on incomplete data will eventually produce a fade that you have to explain.

Tracking commitments is not extra admin for its own sake. It is what makes the rest of your reporting defensible.

If your job reports show costs but not commitments, a diagnostic will show you exactly what that gap is hiding.