Plain definition
Cash commitments are payments the company is obliged to make within a defined period.
They can include approved supplier invoices, payroll, rent, taxes, debt instalments, and binding contractual payments.
A commitment becomes a cash outflow only when it is paid. But omitting it from the cash view makes the company’s position look stronger than it is.
Worked example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A company has a cash balance of . Over the next 14 days, it must pay in payroll, to suppliers, and in rent.
| Payroll | |
|---|---|
| Suppliers | |
| Rent | |
| Total commitments |
| Cash balance | |
|---|---|
| Cash commitments | |
| Cash remaining |
The bank shows today. After the payments already due, only remains.
If management then approves a new purchase, the company creates a shortfall.
Why it matters
A bank balance is a point-in-time record. It does not show which part of the balance has already been allocated to payroll, suppliers, or debt.
Treating that balance as spending capacity can lead management to approve costs it cannot fund without delaying obligations or arranging additional financing.
Practical consequence
Maintain a cash-commitment schedule for a defined period, such as the next 30 days.
For every commitment, record:
- The amount
- The due date
- The responsible owner
- The level of certainty
Reconcile the schedule with supplier invoices, payroll, taxes, leases, and debt payments.
Keep discretionary plans out of the schedule, and record each commitment only once.
The bank balance is not the same as cash available for a new decision.
Try your own numbers
Map expected cash in and out week by week, then see the lowest point before it arrives.
13-week cash-flow forecast