Job Costing: Committed Costs

An important aspect of controlling costs on a Job or project is to know not only the costs already booked to a job, but also those costs to which you are already committed through purchase orders you have placed with suppliers. These job commitments become costs as purchase orders are delivered and suppliers submit invoices for payment.

With Exordia Job Costing, when you place a purchase order the net value of the order is recorded against the job as an outstanding commitment. The sum of "outstanding commitment" and "costs booked" is the total commitment you have made on the job and this can be monitored and compared against the budget on an ongoing basis - ensuring you are in full control of all costs.

When you subsequently record the supplier invoice, the value of the outstanding commitment is reduced by the amount of the invoice and the Work In Progress is increased by the same amount - thus maintaining an accurate relationship between cost commitment and WIP.

Whilst commitment accounting is a substantial benefit in all jobs, it is a particular advantage where orders are placed for job items that have a long lead-time.