Financial commitments
Committed spend vs. actual spend: what CFOs need to track
Invoices tell you what you have paid. Contracts tell you what you have agreed to pay, including amounts nobody has invoiced yet. Tracked side by side, the difference between the two shows obligations your forecast may not include, and which of them a renewal decision can still change.
On this pageCommitted, invoiced and paid
In brief
- Actual spend comes from invoices, payments or the expense booked for the period; committed spend comes from signed agreements.
- The gap between them shows obligations your forecast may not include yet.
- Minimum commitments can cost more than usage suggests, so read the agreement, not the run rate.
- Track both per vendor and per currency, and never add currencies together as they stand.
Committed, invoiced and paid
Finance teams usually describe spend with one word, but there are three different amounts behind it. Each one is recorded at a different moment, by a different team, in a different system.
- Committedis what the agreement says you will pay. It exists from the day the agreement is signed.
- Invoicedis what the vendor has billed so far. It exists when an invoice arrives.
- Paidis what has left your bank account. It exists when the payment runs.
Actual spend usually means invoiced or paid. A budget-versus-actual report kept on an accrual basis counts the expense for the period instead, which can differ from both. Committed spend is the amount that is already decided but not yet visible in any of them.
Where each number comes from
The three amounts come from different records, which is why they drift apart without anyone noticing.
| Amount | Recorded in | Recorded when | Usually kept by |
|---|---|---|---|
| Committed | The signed agreement and any order forms | At signature or renewal | Whoever holds the contract file |
| Invoiced | Accounts payable | When the invoice arrives | Accounts payable |
| Paid | The bank and the general ledger | When payment runs | Treasury or accounting |
Invoiced and paid amounts flow into the general ledger as part of normal accounting. Committed amounts often do not, unless a purchase order covers the full term. A subscription that renews on its own, or a multi-year agreement billed one year at a time, can commit you to far more than any open purchase order shows.
Reading the gap between them
Take a sample software agreement with a three-year term from 1 Feb 2026 to 31 Jan 2029, priced at $120,000 a year and invoiced quarterly in advance: $30,000 on the first day of February, May, August and November.
| Measure | Amount | How it is worked out |
|---|---|---|
| Committed for the term | $360,000 | 12 quarterly invoices of $30,000 |
| Invoiced to date | $90,000 | February, May and August invoices |
| Paid to date | $60,000 | February and May invoices |
| Invoiced, not yet paid | $30,000 | The August invoice, in accounts payable |
| Committed, not yet invoiced | $270,000 | $360,000 minus $90,000 |
A report built from invoices shows $90,000 for this vendor. The agreement says $360,000. The difference, $270,000, will reach accounts payable over the next nine quarters, and nothing in the invoice history says so.
An accrual-basis report shows a third number. The agreement costs $10,000 a month, so the seven months from February to August come to $70,000 of expense on 31 Aug 2026. The other $20,000 already invoiced is a prepayment for September and October.
The gap is not a problem in itself. It is information: money that is already decided, the dates it falls due, and, for agreements that renew, the point after which more of it is decided. Thecommitments ledgeris where that information lives.
Multi-year and minimum-commitment terms
The gap matters most for two kinds of terms: multi-year agreements, where most of the commitment sits in later years, and minimum commitments, where you agree to pay a floor amount whatever you use.
Ask three questions of each agreement with these terms: how much is committed for the whole term, how is any minimum measured, and what happens at renewal if usage stays below it.
Reporting both without mixing currencies
Report committed and actual side by side, per vendor, so the gap for each agreement is visible. Then total them per currency. Amounts in different currencies can't be added as they stand, and a total that mixes them changes every time exchange rates move.
| Currency | Committed this year | Invoiced to date | Not yet invoiced |
|---|---|---|---|
| US dollars | $169,000 | $112,000 | $57,000 |
| Euros | €85,000 | €42,500 | €42,500 |
| Canadian dollars | CA$38,000 | CA$19,000 | CA$19,000 |
If you need one figure in your reporting currency, convert each amount with a recorded rate and the date of that rate, and keep the original amount beside it. An amount with no confirmed currency should stay visible on its own with the reason, not be dropped or guessed.
- Compare committed and invoiced amounts for each vendor at least once a quarter.
- Flag any agreement where invoiced spend runs ahead of the commitment: it may have a usage overage or a price change nobody recorded.
- Flag any agreement with a large uninvoiced balance and a notice deadline in the next few months: that is where a decision can still change next year's spend.
Where LedgerGuard fits
LedgerGuard covers the committed side of this picture. It suggests the term, renewal and payment terms from each agreement, a person on your team confirms them against the highlighted source text, and only confirmed contracts count toward committed spend. Totals use your base currency only where a stored conversion exists; other amounts are listed in their own currency. Invoiced and paid amounts stay in your accounts payable and accounting systems.
Confirmed agreements show the last day you can act and the committed spend, each linked to the clause it came from. Extracted terms are suggestions until confirmed by your team.
Sources and further reading
The agreements and amounts in this article are illustrative. They are not taken from real contracts, and the article uses no outside statistics.
- What is a financial commitments ledger?The record that holds committed spend, with the clause behind every figure.
- How to forecast financial exposure from vendor contractsTurning committed spend and renewal dates into a forward view.
- LedgerGuard sample portfolioSample agreements with committed spend in their own currencies.