Understanding Commitments

A commitment is the recognition of a future obligation. Each time you enter a subcontract order detail line, you can have the system track the amount that you are obligated to pay and apply it to a job or project.

For example, you might be working on a pavement resurfacing project. Each time you enter a purchase order for goods or a subcontract for services to complete the project, you can have the system create a commitment for the purchase order or subcontract amount.

In addition, you can roll over a commitment to the next fiscal year or have the commitments expire at year end.

For example, utilities, local governments, and municipalities normally have the authority to expend funds for one fiscal year. As a result, purchase orders and subcontracts with open balances are often canceled at the end of the fiscal year. Construction projects, however, can often span one or more years. In this case, the open balances of purchase orders and subcontracts are rolled forward to the new fiscal year.

A subcontract commitment is created when a subcontractor is contracted to provide services. The commitment is relieved when services are rendered and you initiate a progress payment.

A functional server program called Update Commitment Ledger (X00COM) is used to create and relieve commitments. The system uses the Update Commitment Ledger to create appropriate entries for subcontract system commitments.