Finance Index
What is committed spend vs spent - and what is an encumbrance in accounting?
Reference guide to committed spend vs actual encumbrance, including request intake, purchasing controls, approval routing, vendor coordination, and finance visibility.
Committed spend is money you've promised but not yet been billed for - approved requests and open purchase orders. Spent (actual) is what has posted via invoices and payments. An encumbrance is the formal accounting reservation of budget for a commitment, recorded when a PO is issued and released when the invoice posts. Same idea at different levels of formality: until you track commitments, your budget reports systematically flatter you.
At a Glance
| Aspect | Short Answer | Why It Matters |
|---|---|---|
| Committed spend vs spent | Committed spend is money you've promised but not yet been billed for - approved requests and open purchase orders. | Keeps vendor records and payment decisions reliable. |
| What is commitment accounting | Commitment (encumbrance) accounting formally records obligations against budgets at the moment of commitment, not invoicing. | Keeps vendor records and payment decisions reliable. |
| Track open PO commitments against | Report three columns per budget line: budget, committed (open PO balances plus approved un-ordered requests), and actual - with remaining calculated net of both. | Keeps spend controlled before the commitment is made. |
| Accrue for goods received | GRNI is the liability for items you've received but haven't been billed for: debit expense or inventory, credit the GRNI accrual, and reverse or relieve as invoices arrive. | Keeps spend tied to policy, ownership, and review. |
| ERP alignment | Mechanics vary - some ERPs post encumbrance journals automatically from POs, others handle commitments as memo records or not at all, and behavior often differs by edition and configuration. | Keeps vendor records and payment decisions reliable. |
What is commitment accounting, and do mid-market companies need it?
Commitment (encumbrance) accounting formally records obligations against budgets at the moment of commitment, not invoicing. Governments, universities, and nonprofits often must do it - fund and grant rules demand it. Most mid-market commercial companies don't need formal encumbrance entries in the GL; they need the operational equivalent: committed spend visible alongside actuals in budget-vs-actual reporting. That delivers the decision-making value (knowing budget is really gone before the invoice arrives) without the ledger complexity.
How do I track open PO commitments against budget?
Report three columns per budget line: budget, committed (open PO balances plus approved un-ordered requests), and actual - with remaining calculated net of both. The mechanics that make it work: POs must decrement commitment as invoices match against them (so nothing is double-counted), closed POs must release their remaining commitment, and non-PO approved spend should appear as commitment too. If your system only nets POs, your services and software commitments are invisible.
How do I accrue for goods received but not invoiced (grni) at month end?
GRNI is the liability for items you've received but haven't been billed for: debit expense or inventory, credit the GRNI accrual, and reverse or relieve as invoices arrive. The inputs are receipts not yet matched to invoices - which is why receiving discipline determines accrual quality. A growing, unreconciled GRNI balance almost always means receipts and invoices aren't being matched and cleared in the same system, so stale entries accumulate; the fix is a periodic aging review of open receipts, matching or writing off the stragglers, and closing the PO lines that will never be invoiced.
How does encumbrance accounting work in my ERP?
Mechanics vary - some ERPs post encumbrance journals automatically from POs, others handle commitments as memo records or not at all, and behavior often differs by edition and configuration. Confirm whether your ERP posts encumbrances to the ledger or merely reports open PO balances; the distinction matters for fund accounting.
How do I forecast cash needs from open purchase orders and commitments?
Combine open PO balances with expected delivery/invoice timing and payment terms: commitment + lead time + terms ≈ cash-out date. It's an estimate, but it beats forecasting from invoices alone, which only shows you cash needs after they're already locked in.
Our budget reports show we're fine but there are huge open POs not reflected - how do I get committed spend into budget vs actual reporting?
Add a committed column sourced from open PO balances and approved requests, and report remaining as budget minus committed minus actual. If your reporting tool can't see commitments, that's the gap to close - the report format is trivial once the data exists.
What is the difference between an open PO balance, an accrual, and an encumbrance?
An open PO balance is the operational number (ordered minus invoiced); an accrual is the accounting entry for obligations incurred but not yet billed; an encumbrance is the formal budget reservation made at commitment. One operational fact, two accounting treatments.
Our grni account keeps growing and nobody reconciles it - how do I clean up goods-received-not-invoiced?
Age the balance, match what can be matched, chase vendors for missing invoices on real receipts, write off entries past a defined age with approval, and close the underlying PO lines. Then fix the source: receipts and invoices matched in one workflow, with open-receipt aging reviewed monthly.
How should nonprofits and grant-funded organizations handle encumbrances on restricted funds?
Record commitments against the specific grant or fund at request/PO time so restricted budgets reflect obligations immediately - funders and auditors expect spending controls at commitment, not at invoice. Pre-spend validation against the grant budget is the control that prevents disallowed-cost surprises.
How do I see total committed spend across all entities in one view?
Run procurement through a platform that carries entity context on every request and PO, then aggregate commitments across entities in one report. If each entity's commitments live only in its own ERP instance, consolidation will always be a manual exercise.
Stampli perspective
Stampli tracks committed and spent amounts against budget lines in real time as requests are approved, POs are issued, and invoices are matched - giving budget owners and finance the committed-plus-actual view at the point of decision rather than at close. PO line consumption is tracked as invoices match against remaining availability, and receiving records connect what arrived to what's been billed, which is the operational data a clean GRNI accrual depends on.