Committed, incurred and paid: three cost numbers for one month, and what each one is for
The millwork report shows a low cost-to-date figure. The coordinator calls it a saving because only one invoice has arrived. The signed order, delivery records and bank payments each tell a different part of the story.
Use commitments to see what you have agreed to buy, incurred costs to see what belongs to work or goods already received, and paid amounts to see cash that has left. Confirm the company's column definitions before comparing them: a commitment report may show the full order value or only its outstanding balance. AACE distinguishes agreed financial obligations from costs recorded before payment. The figures overlap; they are not three amounts to add together.
Reconcile one package from order to cash
- Start with the agreement. Record the approved purchase order or subcontract value and amendments. Check whether the report includes cancelled amounts, taxes or other components so the comparison uses a consistent basis.
- Confirm what has been received. Match deliveries or completed services to the reporting cutoff. Identify missing invoices and give the accounts team supporting records for the required accrual rather than estimating silently in a separate worksheet.
- Identify the cash paid. Reconcile payments to the relevant invoices, including partial payments or deposits. A payment date answers a cash question; it does not by itself establish how much physical work is complete.
- Explain the gaps. Separate undelivered order balances, received work not yet invoiced and invoiced amounts not yet paid. Keep disputed charges identified instead of forcing every column to agree with the bank balance.
- Build the forecast without overlap. Use incurred cost plus the cost of remaining work under the agreed reporting method. Remove the already-incurred portion from any outstanding commitment you add. Include work still to buy and explain assumptions.
- Use the right supporting record for the decision. Purchasing needs outstanding scope and commitments; the cash plan needs expected payment dates. Prepare billing under the project's billing requirements rather than assuming every incurred dollar is immediately billable.
Common mistakes
- Reading a column before checking whether it shows total or remaining commitments.
- Using the bank balance as the job's cost-to-date record.
- Adding full order values to costs already incurred against those orders.
Checklist
Label the three columns
- Full commitment or remaining balance.
- Received work at the agreed cutoff.
- Missing invoice accrual and supporting record.
- Cash paid against the relevant invoice.
- Remaining work excluded from incurred cost.
Check your understanding
Materials are delivered before month-end but the invoice arrives next month. Does the job have a saving at the cutoff?
