Commitment accounting is the process of reserving funds to cover future payment obligations.
Historically, an organisation could raise a number of requisitions until an order was received and the budget met. This often led to various requisitions being approved, leaving budgets overspent.
The key strength of the Unit4 Business World (Agresso) commitment accounting module is that it allows you to funds check. Funds checking allows you to identify the budget available to meet expenditure raised via the system.
Within Unit4 Business World (Agresso), commitments are broken down into the following categories:
Soft Commitments: Potential expenditure
Hard Commitments: Committed expenditure
Accrual Commitments: Committed expenditure for which goods/services have been received
Manual Commitments: Manual entries to account for known items of future expenditure, usually when the value is highly material to the organisation (e.g. building works costs)
Seamlessly integrated into the balance table, this module allows potential expenditure to be factored into reporting.