Budget vs. Committed Cost. What's the difference?

Many may ask "What's the difference between my budget and committed cost?". It's a great question and the answer lies in the original estimate and purchase orders. In TakeOff Plus when we finalize a Bid we then have an accurately estimated cost budget for a particular subdivision. However, factors can affect what the actual purchase cost will be later in the project that could cause some variance from the original budget. So, first the budget is set once the estimator finishes the initial Bid and then transfers that to Job Accounting. In essence, the Bid determines the Budget.

The Purchase Orders (or Subcontracts) are what determine the Committed Cost. The committed cost can be, and many times is, equal to the budget, but not always. Let's take the Electrical part of the house for example. On one of your jobs, your normal electrician is unable to perform the work at the needed schedule time so you have to find another sub to do the work. This change will happen on the PO or Subcontract, which in turn will update your committed cost, not the original budget.

Purchase Orders and Committed Cost are a deeper level of controlling costs than just using a budget. They also insure that invoices get entered properly to the right budget categories by populating from what the estimator setup and not leaving it open for questions by the office person doing the accounting. It takes the "guesswork" and loss of productivity out of the processing of AP Invoices due to the fact that less communication is needed between the actual estimator and bookkeeper.

Please let me know any questions or comments you have on this topic. Have a great day!

Steve Mallory