Committed Costs Reporting: Stop Construction Budget Overruns

Right now, your superintendent has $200K in open POs for materials that haven't been invoiced yet. Your project manager signed a $150K subcontract last week that accounting hasn't entered. Your "profitable" $2M project? It's already over budget, but your reports won't show it until next month.

This article shows you how to: Track every dollar you've committed (not just spent), spot budget problems 60 days earlier, and use real-time data to save projects before they go underwater.

Table of Content:

What Are Committed Costs in Construction?

Three Ways Committed Costs Can Kill Construction Profits

How Real-Time Committed Costs Tracking Can Save Your Projects

Benefits of Real-Time Tracking

Why Manual Tracking and Excel Always Fail

Building Your Real-Time Committed Costs System

Your 4-Week Implementation Plan

Calculate Your Hidden Committed Costs Risk

What Are Committed Costs in Construction?

Committed Costs = Legal obligations you must pay (Purchase Orders + Subcontracts)

Actual Costs = Invoices you've already paid

Most contractors only track actual costs in their accounting system, but this is where the problem starts. If you're not tracking committed costs, you're making decisions based on outdated data.

Why Committed Costs Matter to Your Bottom Line

When you only see actual costs, you're driving blind. Here's an example:

• Day 1: Your superintendent orders $50K in steel.

• Day 30: The steel is delivered to the job site.

• Day 60: The invoice arrives at your desk.

• Day 75: The accountant enters the invoice, and you see you're over budget.

By Day 75: You've lost 10 weeks to fix the problem. The damage is done.

With 8-12% quarterly material price swings in 2024-2025, waiting 60 days for updates can completely wipe out your profit margin.

Three Ways Committed Costs Can Kill Construction Profits

1. The Uncommitted Scope Disaster

The warning sign:

Your project is 60% complete.

But only 35% of your materials are locked in with POs.

What this means: The remaining 65% of materials are exposed to:

• Price increases (8-12% in recent quarters)

• Supply chain delays forcing premium pricing

• Substitutions at higher cost

• Rush delivery fees

Real case: A $2.5M commercial project had $750K uncommitted in April 2024. By July, prices jumped 15%. The result? A $200K profit became a $50K loss.

2. Duplicate Orders Draining Cash

How it happens:

Monday: Field super needs lumber, creates PO for $25K

Wednesday: PM doesn't know, orders same materials for $25K

Two weeks later: Both deliveries arrive

Next month: Both invoices get paid ($50K out the door)

Annual impact: GCs lose $150K-$200K yearly to duplicate orders across projects.

Why? No real-time system connecting field decisions to office visibility.

3. False WIP Reports Crushing Your Bonding

Your monthly WIP report shows:

• Original Budget: $1,000,000

• Actual Costs to Date: $650,000

• Projected Final Cost: $950,000

• Projected Profit: $50,000 

The real numbers your accountant doesn't see:

• Actual Costs: $650,000

• Committed Costs (not invoiced): $380,000

• Real Total: $1,030,000

• Actual Profit: -$30,000 

The consequence:

Your surety reviews your WIP schedule. They see the real committed numbers. They reduce your bonding capacity by 30%.

You lose the next bid opportunity.

How Real-Time Committed Costs Tracking Can Save Your Projects

Fix Problems Before They Become Disasters

Traditional approach: Wait for invoices to tell you what went wrong

Real-time approach: See commitments the day they're created

The difference:

Issue	Old Way	New Way
Budget overrun detected	60 days later	Same day
Time to fix	None (too late)	8+ weeks
Average savings	$0	$75K-$150K per project

Benefits of Real-Time Tracking

1. Accurate WIP for Banks and Sureties

With committed costs tracked, your WIP is reliable, increasing bonding limits and ensuring faster approvals.

2. Cash Flow You Can Actually Predict

Predict upcoming payments and adjust your AP timing accordingly.

Example:

• Week of Dec 23: $125K subcontract payments due

• Week of Dec 30: $80K material invoices arriving

• Week of Jan 6: $95K equipment rentals payable

Total visibility: $300K leaving in the next 3 weeks

3. Automated Red Flag Alerts

Your system watches 24/7, alerting you when:

• A PO exceeds the cost code budget

• Committed and actual costs exceed the project budget by 5%

• Uncommitted scope exceeds your risk threshold

• A subcontract change order creates budget exposure

Read more: Why Your Construction Company Needs Real-Time Job Cost Reporting

Why Manual Tracking and Excel Always Fail

The Field-to-Office Information Black Hole

What actually happens:

• In the field: Superintendent writes PO on a clipboard, which sits in the truck for 2 weeks, gets coffee-stained, and finally reaches the office.

• In the office: Errors occur during data entry, and the PO is entered 3 weeks late.

Meanwhile, invoices arrive before the PO is even in the system. Accounting pays them, and you're over budget before you even know it.

The Spreadsheet Death Spiral

Month 1: "I'll track our POs in Excel"

Month 2: Three different versions floating around

Month 3: 12 separate spreadsheets across projects

Month 4: Field stops updating them

Month 6: No one knows which file is current

Month 8: Project manager quits, takes spreadsheet knowledge

Month 9: Complete chaos. You have zero visibility.

The fundamental problem: Excel can't connect fields to offices in real-time. It's just another manual process waiting to break.

Building Your Real Time Committed Costs System

Step 1: Choose Your Technology Foundation

For Sage 100 Contractor Users:

• Built-in capabilities: Job costing with PO integration, subcontract management, committed cost reporting.

• What you need to add: Mobile PO entry, automated budget alerts, real-time dashboard.

For QuickBooks Online Users:

• The challenge: QBO lacks native construction job costing.

• The solution: Construction-specific integrations that add committed cost tracking to QuickBooks.

Step 2: Essential Features Your System Must Have

Mobile access for field teams:

• Create POs in 30 seconds

• Attach photos for quotes

• GPS tagging for delivery locations

Automatic budget monitoring:

• Real-time comparison of budget vs. committed costs

• Visual indicators (red/yellow/green)

• Detailed drill-down for line items

Change order integration:

• Link change orders to original commitments

• Track scope creep in real-time

• Update budgets automatically

Read more: Sage 100 Contractor vs QuickBooks - Features & Price Comparison

Your 4 Week Implementation Plan

Week 1: Process Audit and Planning

• Map your current workflow: Identify bottlenecks in the PO process and document all handoffs.

• Deliverable: Process map showing your current vs. ideal workflow.

Week 2: Data Centralization Setup

• Import existing commitments: Load all POs and subcontracts from the past 90 days.

• Connect field to office: Set up mobile access for field teams and create PO approval workflows.

Week 3: Team Training and Buy-In

• Training for field teams: Show them how to create POs in 30 seconds on mobile.

• Training for office teams: Teach how to run committed cost reports and set up budget alerts.

Week 4: Pilot Project Launch

• Select a pilot project: Choose a project 20-40% complete and test the new system.

• Deliverable: A smoothly running project on the new system.

Calculate Your Hidden Committed Costs Risk

The 5-Minute Exposure Assessment

Use this formula:

Total active project budgets × % scope not yet on PO × Expected material inflation rate 

= Your hidden risk exposure

Example Calculation

Your numbers:

• $8M in active project budgets

• 45% of scope not yet committed (no POs issued)

• 10% annual construction material inflation

Your calculation: $8M × 45% × 10% = $360,000

What this means:

You could lose $360K simply from price increases on materials and services you haven't locked in yet.

This assumes: Materials increase at 10% annually (conservative based on 2024-2025 volatility)

In reality: Some materials have spiked 15-20% in single quarters recently.

Run Your Own Numbers

Step 1: Add up all active project budgets: $___

Step 2: Estimate % of scope uncommitted: ___%

Step 3: Use 10% inflation estimate (or your own forecast): ___%

Your exposure: $___

Action: If this number is larger than your typical project profit, you need committed costs tracking immediately.

Stop Driving Blind on Your Construction Projects

Real-time committed costs reporting is the difference between a contractor who scales and a contractor who goes out of business. It’s about taking control of your data so you can take control of your future.

Ready to eliminate budget surprises?

CCA specializes in committed costs tracking for Sage 100 Contractor, and QuickBooks Online users. We help construction companies implement real-time cost visibility systems that actually work with field teams who love using them.

Schedule a committed costs assessment to see exactly where your hidden risks are and get a custom roadmap for your company.

Visit Construction Cost Accounting to learn how we help GCs, subcontractors, and construction owners master WIP reporting, job costing accuracy, and integrated project management systems that protect profits on every project.