Commitments or liabilities refer to the obligations or debts that a contractor is required to pay. This includes items like purchase orders, subcontractor fees, and other financial commitments necessary for the project. Tracking liabilities is crucial for maintaining the financial health of a project.

How Commitments/Liabilities Affect Financial Health

Commitments and liabilities represent the financial obligations of a project that must be paid off over time. These include long-term liabilities like subcontractor contracts and short-term commitments such as supplier payments. Properly tracking these liabilities ensures contractors can manage cash flow, avoid overspending, and meet all financial obligations on time.

Best Practices for Managing Commitments and Liabilities

Contractors should use financial management software to track all project-related liabilities. Keeping an up-to-date record of commitments allows for better cash flow management and ensures the business remains solvent throughout the project’s lifecycle. Related Terms: Purchase Order (PO), Subcontract

FAQs

Why is it important to track liabilities in construction projects?

A: Tracking liabilities ensures that a contractor can meet financial obligations on time and maintain project cash flow, preventing overspending or cash shortages.

What are examples of liabilities in a construction project?

A: Examples include subcontractor fees, purchase orders, material costs, and any other debts the contractor is obligated to pay.

Commitments/Liabilities Definition

How Commitments/Liabilities Affect Financial Health

Best Practices for Managing Commitments and Liabilities

FAQs

Why is it important to track liabilities in construction projects?

What are examples of liabilities in a construction project?

Upload the project budget using your own cost codes, and follow the financial progress in real-time