Film Accounting Glossary
Commitment
What is a commitment?
Also called open commitment, or committed cost.
A commitment is money the production has contractually promised but not yet been invoiced for, most often an open purchase order.
Commitments belong on the cost report because a signed vehicle rental or equipment order is a real cost regardless of whether paperwork has caught up. Tracking open commitments against the purchase order log is what keeps a cost report from quietly understating the picture.
Example
A signed purchase order for $27,000 of vehicles produces no invoice until wrap. It is a real cost from the day it is signed, so it belongs in the commitments column. Leave it out and the report understates the show by $27,000.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
The commitments column of the cost report, sourced from open balances on the purchase order log.
Common mistake
Leaving open purchase orders off the report until the invoice arrives. The picture then looks under budget by exactly the amount it has already promised to spend.
Related questions
- Is a purchase order a cost before the invoice arrives?
- Yes. Once approved it is a contractual obligation, so it belongs in the commitments column whether or not the vendor has billed for it yet.
- Where do commitments appear on a cost report?
- In their own column between actuals and the estimate to complete, sourced from the open balances on the purchase order log.