Your buying team wants to place the next stock order. Before you approve it, you need to know how much cash existing purchase commitments will require over the coming weeks.
The open purchase order report gives you a total, but logistics has a revised freight quote. One supplier has split a shipment, and another needs payment before dispatch. Meanwhile, accounts payable holds invoices for stock that the warehouse has already received.
Each team can explain its part. Your decision depends on seeing the whole purchase through to payment, including the charges and changes that sit outside the original order.
Purchase commitments are amounts the business has agreed to spend through orders or contracts. To assess their cash impact, finance must follow them into receipts, invoices, and payments, adding related costs that are still estimates. Keep those estimates distinct from agreed amounts. A closed order can still leave an unpaid bill, while an open order can include a deposit you’ve already paid.
Why Distribution Purchase Orders Can Understate the Full Cost
A stock order records the agreement with the goods supplier. It may exclude the freight forwarder’s charges or later changes to delivery. If finance forecasts from that order alone, the cost of getting the stock into the warehouse can remain incomplete.
Freight and import charges sit in separate records
Freight, handling, and import charges may come from different suppliers. Purchasing can know the unit price while logistics holds the delivery estimate and finance waits for the related bills. Each record serves a purpose, but someone must connect them to the purchase.
The Financial Reporting Council’s FRS 102 includes directly attributable transport and handling, import duties, and non-recoverable taxes within inventory purchase costs. Your approval process needs an estimate of those costs before the bills arrive.
Connect each material additional charge to the relevant order or shipment. Record its amount or estimate, source, and owner. Where one consignment contains several orders, keep the shipment reference so finance can reconcile the charges across them. An unknown cost should remain visible instead of becoming a zero in the forecast.
Split shipments can change the delivery cost
A buyer may ask the supplier to send available stock ahead of the rest to fulfil a customer order. The goods price may stay the same while the revised transport arrangement adds a charge. If logistics confirms that charge by email without updating the forecast, finance continues to use the original cost.
Require material changes to update the purchasing record and the forecast. Keep the original approved amount available for comparison. That lets you distinguish a change in the commercial agreement from a forecasting error, and decide whether further approval is needed.
How Stock Delivery Delays Affect Cash Flow Forecasts
A delayed shipment doesn’t automatically release cash for another purchase. The effect depends on the agreed payment terms and which payments remain due.
Build payment timing from the agreement
A supplier might require payment before dispatch, after delivery, or in stages. Moving the expected arrival date won’t necessarily move a deposit or a balance due before shipment. Check the payment condition before shifting the cash forecast.
The International Trade Administration confirms that Incoterms don’t set payment method or timing. Check the payment agreement separately from delivery terms.
Check the cash impact of replacement stock
If stock arrives late, payment may fall due before you can fulfil and bill the customer order. Buying replacement stock from another supplier can create a second cash demand while the original purchase remains outstanding. Compare the two payment schedules and any revised date for the customer’s payment. Confirm what purchasing can defer or cancel before reducing the original forecast.
How to Forecast Cash Required for Purchase Commitments
The full expected purchase cost and the remaining cash requirement answer different questions. Keep both visible, especially when orders involve deposits, partial receipts, or disputed invoices.
Build the forecast around payment obligations
Start with unpaid invoices, then identify the portions of orders still to be billed and any additional charges. Match each receipt and accrual to that record rather than adding the accrual balance as another payment. Reconcile deposits to the invoices or future instalments they reduce.
Use the order-line and shipment references to connect the warehouse receipt to the supplier invoice. For a charge covering several orders, retain the supplier’s invoice reference and a schedule showing how you split it. That lets you analyse costs by purchase while checking that the supplier payment appears only once in the cash forecast.
Show the remaining cost and payment dates together — an example
Consider an illustrative distributor’s stock order, excluding VAT, foreign exchange, and other charges. Goods cost £20,000. The warehouse has received £8,000 of stock. The supplier has invoiced that amount and applied the £4,000 deposit already paid. The remaining goods cost £12,000.
A £2,000 freight quote covers this purchase and another order. For this example, shipment weights support a 60:40 allocation, assigning £1,200 to this purchase. The reporting view is:
| Component | Expected total cost | Already paid | Cash remaining | Expected payment |
|---|---|---|---|---|
| Delivered and invoiced goods | £8,000 | £4,000 | £4,000 | Week 1, agreed |
| Goods still to be delivered and billed | £12,000 | £0 | £12,000 | Week 3, based on agreed terms and expected dispatch |
| Allocated freight | £1,200 | £0 | £1,200 | Week 4, estimated |
| Total for this purchase | £21,200 | £4,000 | £17,200 | Spread across three weeks |
The deposit reduces cash remaining without reducing purchase cost. The receipt supports the invoiced goods; it creates no extra payment in this schedule. The freight allocation across both purchases must still reconcile to the single £2,000 expected supplier payment. When the actual freight invoice arrives, replace the estimate and update the allocations.
The FD can now compare the £17,200 payment schedule with available cash before approving another purchase. Week 4 remains an explicit assumption. For a live forecast, include applicable tax payments and other cash items as well.
Separate currency and supplier estimates from confirmed costs
For foreign-currency purchases, record the transaction currency and the exchange-rate assumption used in the cash forecast. If treasury has arranged cover, use the relevant settlement information. Avoid presenting an estimated sterling amount as an agreed final cost.
A disputed charge needs similar treatment. Show the supplier’s demand, the amount your team expects to settle, and the assumption behind that expectation. The FD can then judge how much headroom to retain while the dispute remains open.
A useful purchasing forecast shows what remains to pay, when it is likely to leave the bank, and which assumptions could change it.
How Sage Intacct Tracks Purchase Commitments
Sage Intacct can support a view of purchase commitments alongside actual expenditure. The useful starting point is the management report you need, followed by the workflow and data required to produce it.
Compare committed spending with actuals
Sage’s guidance describes using a separate user-defined book to record purchase commitments and report them against budget alongside actual expenditure. Its example releases the commitment when the vendor invoice records the expense.
This requires Purchasing with advanced workflows and an appropriate book and journal setup. Confirm the subscription requirements for your environment. The report still needs an agreed method for handling partial orders and related charges; a commitment balance doesn’t establish when cash will leave the bank.
Specify the cash reporting separately
Sage’s purchasing documentation distinguishes purchasing transaction states from accounts payable states: a closed purchasing transaction doesn’t necessarily mean the bill has been paid. Commitment reporting therefore supplies one input to the payment schedule above.
To produce that schedule, your reporting design must also bring together payments, remaining invoice balances, future instalments, and related cost estimates. Assess which data is available in your setup and which needs an agreed feed from purchasing or logistics. Confirm the reporting or integration work required through a test using a partial delivery and deposit. Specify and test this wider forecast separately from the commitment-book setup.
Which Open Purchase Orders Need Finance’s Attention?
Give finance a view across stock purchases, with the option to examine the supplier, shipment, or receiving warehouse behind a material change. Agree responsibilities: purchasing maintains order changes, logistics confirms delivery information, and accounts payable reconciles invoices and deposits. Finance brings those inputs into the cash forecast.
Explain changes in expected supplier payments
Ask for the movement in expected payments, with the main causes identified. New orders, revised quantities, payment-date changes, and updated cost estimates should explain the movement. Separate actual payments from changes in assumptions so the comparison remains useful.
Keep the previous forecast available and compare estimated charges with the final bills. That helps you identify suppliers or charge types that repeatedly need larger allowances.
Prioritise stock orders that put pressure on cash
Prioritise payments that move into a week with limited headroom, material increases in expected cost, and orders whose cancellation remains unconfirmed. Each requires a different decision: arrange funding, approve a revised cost, or obtain a supplier agreement.
Record the decision and who will carry it out. Escalate unresolved items before the affected payment date. Avoid allowing a disputed amount to disappear from the forecast simply because nobody has confirmed its treatment.
Why Purchase Order Reporting Gaps Keep Recurring in Distribution
Before commissioning a new report or replacing software, identify where the information stops reaching finance. Different causes need different responses.
Check whether logistics updates reach finance
Follow a recent shipment change from the supplier’s message to the cash forecast. If the revised freight charge never left the logistics team’s inbox, agree where to record it and who must update it. A new report will still need that information. Check the handover before choosing new software.
You can test the proposed report with a controlled spreadsheet and a limited set of material orders. Give it a common reporting date, named owners, and a reconciliation. Use the test to establish which information helps the FD make a decision before specifying permanent changes.
Test the link between purchasing, warehouse, and finance records
If logistics records revised costs promptly but finance repeatedly rekeys them, review the data transfer. Where the warehouse system records a partial receipt, check whether finance can identify the quantity still due and connect the supplier invoice to the same order. These are specific reporting and integration requirements you can test.
Choose an actual order with several changes and use it as an acceptance test. Can the proposed setup show the latest expected cost, the payments already made, and the remaining payment dates? Can your team explain a difference without returning to separate email chains?
Check Purchase Commitments Before Approving the Next Stock Order
Take the next material stock purchase awaiting approval. Ask your team to show the remaining cash requirement for existing purchases, the dates behind it, and the unresolved amounts that could affect the decision. Note which answers require manual investigation and why.
If those gaps recur, a discovery session with us can help you assess the purchasing workflow and reporting you need. Bring a stock order with a partial delivery or shared freight charge, and the reports your team uses to track its cost and payments. We’ll see how Sage Intacct can make your life easier.
