A solid commitments register: essential but often forgotten

Many organisations think their commitments administration is well organised.

There’s a system, the invoices get paid and the budgets seem to be on track. But appearances can be deceptive. Look closely and you’ll often find the basics missing: visibility of financial commitments that have already been made before the invoice arrives. And that’s exactly where it goes wrong. “Many organisations don’t realise that an accurate commitments administration isn’t a nice-to-have, but a must for financial control, compliance and risk management.” In this blog, Piet Dijkstra, Senior Consultant Source to Pay at Spendlinq, talks about a fundamental change in how we think, work and collaborate.

A commitments register records the financial commitments an organisation has entered into before an invoice ever appears. This covers orders, contracts, framework agreements and other undertakings that will lead to spend. “Without insight into commitments, you’re always chasing the facts,” says Piet. And that has serious consequences. Budgets get overspent, invoices are assessed without the right context, and financial reports are incomplete or even incorrect.

External pressure

External pressure is also growing. Regulators, auditors and control departments are setting ever stricter requirements for the justification of spend. Not only in the public sector, where the lawfulness of spend is central, but also in business, where audit trails, governance and risk management determine trust, stability and strategic success. ESG reporting, supplier risks, contractual commitments and internal controls all touch on the commitments register.

A bridge between procurement and finance

Yet the real crux lies elsewhere: in the division of roles between finance and procurement. “Finance often carries the problem, but procurement holds the key to the solution,” says Piet. “That sounds counterintuitive, because commitments seem like a finance topic at first glance. But the reality is that commitments arise at the source: the moment something is ordered or contracted. And that almost always happens in the procurement process. Only when procurement records those commitments and builds them into the process do you get a reliable register.”

That has a direct impact on how people in the organisation work. Employees who need something – from software licences to office supplies or hiring external staff – have to request it in advance. They have to state what they need, why, for what amount and whether there’s budget for it. Often they also need approval before anything can be ordered. At work this often feels cumbersome or bureaucratic, while in our private lives it’s the most normal thing in the world.

“Nobody buys a new washing machine at home without checking whether there’s budget for it, yet at work people find it strange that they can’t just order,” says Piet with a wink. “Changing that mindset may well be the biggest challenge.”

No surprises

“At Spendlinq, we’re convinced that the key lies in combining clear processes with user-friendly technology and a strong change strategy,” Piet continues. “It has to be logical and low-threshold for employees to do the right thing. And you have to explain why it matters: it’s not about control, but about grip, lawfulness and avoiding surprises.”

The Source to Pay chain

Modern Source to Pay solutions offer plenty of possibilities here. They make it possible to automate requests, orders, budget checks and approvals and make them intuitive. But they go further than that. A good solution bridges the gap to contract management and records the commitments there too. That completes the circle: from need to order, from contract to payment.

“If you take your commitments administration seriously, you can’t get around contract management”, says Piet. “You need to be certain there’s a lawful, approved agreement in place before you enter into commitments. And you want to link those contractual commitments automatically to your procurement and financial processes.”

This also touches on the broader question of how contracts are lawfully established – a topic that’s increasingly under the microscope, particularly in the (semi-)public sector. But the risks are significant in commercial environments too: from unauthorised agreements to missing justification in financial audits.

An integrated approach

It’s therefore essential to look at the whole Source to Pay chain in an integrated way. Many organisations focus on a single element – such as invoice processing or contract management – but miss the bigger picture. “It’s important to understand how everything fits together: if you only automate the back end, you’ll still have risks at the front end”, Piet stresses.

That doesn’t necessarily mean putting everything into one single system. Integrations between specialised software tools can work perfectly well, provided the processes are set up properly and the data flows through correctly. Even so, working with one integrated Source to Pay solution makes the whole thing considerably simpler. Not just for users, but above all for reporting and control.

“The fewer systems, the fewer manual links, the more reliable your data”, Piet explains. “But the most important thing is that you make your choices based on the process, not on existing systems or habits.”

A fundamental change

A proper commitments administration therefore takes more than technology. It calls for a fundamental change in how people think, work and collaborate. Finance and procurement need to work together. Employees need to understand why they have to request something up front. And the organisation has to be willing to change not just systems, but also behaviour and culture.

“This isn’t a finance project, it’s an organisational change”, Piet concludes. “If you get it right, you get a lot in return: peace of mind, control, reliability – and the trust of everyone who needs to be able to rely on the numbers.”