Open Purchase Orders: The Cash Commitments Missing From Your P&L
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Article Summary
Open purchase orders should appear in the cash forecast as dated future payments, even though they are not yet posted expenses. Forecast only the remaining unbilled amount of each order plus the billed portion already in accounts payable. In a hypothetical example with $90,000 of orders, $22,000 of paid deposits and $12,000 in AP, the business still expects $68,000 of future cash outflow. Adding full PO totals to AP would double count to $102,000, while using AP alone would omit $56,000.
The P&L looks comfortable, the bank has cash, and the operations team has already ordered $90,000 of equipment and materials. If those purchases are absent from the cash forecast, the owner is deciding how to spend money that may already be committed.
Open purchase orders need a place in liquidity planning before every vendor bill arrives. That does not mean posting every PO as an expense. It means maintaining a dated record of future payments and reconciling it to accounting.
For a contractor, MSP, agency or other service business using outside suppliers, the useful question is: what cash have approved orders committed, and when will it leave?
Separate the order from the accounting event
Intuit's QuickBooks training manual identifies purchase orders as non-posting entries. An order can therefore be visible to purchasing while remaining outside expense totals.
Once goods or services are received, the accounting treatment depends on the facts and the company's policies. The result might involve an expense, inventory, equipment, a prepayment or an accrual. Have the accountant determine that treatment.
Don't wait for the formal P&L entry to plan the cash. Conversely, don't manufacture an expense just to force a future purchase into a report.
The cash-versus-accrual guide explains the broader reporting distinction. The commitment register addresses what neither a historical bank balance nor an incomplete invoice list can tell the owner.
Build the remaining-payment register
Start with approved orders and supplier confirmations. Record the vendor, order line, original amount, deposits, amounts received, amounts billed, remaining unbilled amount, expected delivery and payment terms.
The line level matters. An order can be partly delivered and partly invoiced. Closing the whole PO after the first invoice hides the balance; leaving the full original amount open overstates it.
Add a named owner for the delivery date and another for payment scheduling if responsibilities differ. “Next month” should become a week once the supplier confirms it.
Keep tentative requests outside committed purchases. An unsigned internal wish list belongs in a scenario until approved. At the other extreme, a binding order should not disappear because the project manager hopes to cancel it.
Reconcile one hypothetical purchasing packet
Assume these three approved orders. Deposits shown below have already been paid and do not overlap the billed amounts.
| Order | Original value | Paid deposit | Billed portion now in AP | Remaining unbilled cash |
|---|---|---|---|---|
| Equipment | $40,000 | $10,000 | $0 | $30,000 |
| Project materials | $30,000 | $0 | $12,000 | $18,000 |
| Outside implementation | $20,000 | $12,000 | $0 | $8,000 |
| Total | $90,000 | $22,000 | $12,000 | $56,000 |
The business still expects $68,000 of future cash outflow: $12,000 already in AP plus $56,000 of unbilled commitments. The $22,000 deposits are past cash outflows.
Adding the full $90,000 PO total to the $12,000 AP balance would forecast $102,000 and double count both paid and billed portions. Using AP alone would omit $56,000.
Allocate the $68,000 to actual expected weeks. The aggregate total doesn't reveal whether deliveries coincide with payroll or tax funding.
A free 20-minute Profit & Tax Leak Check can help identify why apparently available cash keeps disappearing. Bring rough numbers; no documents are required, and the review is directional.
Give each dollar one place in the forecast
As an unbilled order becomes a bill, move the cash commitment into the AP schedule rather than adding another payment.
Intuit's purchase-order guidance describes linking orders to bills or expenses. The management control is the same regardless of software: preserve the connection and retire the matching forecast portion.
Use a unique order and line reference. Reconcile received-but-unbilled items with the accounting team's accrual process, while ensuring the expected payment appears only once.
Bank payments should clear the scheduled obligation. Supplier credits, returns, freight and change orders need their own documented adjustments. A register that never changes after approval is only a second copy of the original order.
Challenge dates and cancellation assumptions
If the supplier can deliver earlier, test the earlier payment date. If payment is due on shipment rather than receipt, use the shipment condition.
Ask which orders can actually be delayed or cancelled and at what cost. Review the contract where uncertain. Do not mark an order “cancelled” until the relevant process and confirmation support that status.
Old open POs deserve investigation. Some are stale records after completed purchases; others are real obligations whose delivery has slipped. Those cases require opposite corrections.
Tie project-related purchasing to the backlog conversion model. If the customer start moves but supplier delivery doesn't, the company may fund materials before it can bill the project.
Use the register before approving new spend
At the weekly cash meeting, show opening usable cash, expected receipts, AP payments and the separate unbilled commitment layer. Then show planned but unapproved purchases as a scenario.
Bennett's financial approach requires costs to be visible before leadership accelerates growth. A commitment register makes that principle practical without pretending that every order is already an accounting expense.
Fractional CFO support can connect purchasing, delivery and finance so one approved order creates one forecast obligation.
Before authorizing the next equipment purchase or distribution, reconcile the largest open orders to deposits and AP. If the remaining cash requirement changes what the business can afford, use the Profit & Tax Leak Check to identify the next funding or spending decision.
Frequently asked questions
Why don't open purchase orders show up on my P&L?
A purchase order records an intended purchase, not a posted expense or bill. QuickBooks treats purchase orders as non-posting entries, so an order can be visible to purchasing while remaining outside expense totals. The approved order may still have committed cash, so track it in liquidity planning before the vendor bill arrives.
Should I record every open purchase order as an expense?
No. Once goods or services are received, the accountant determines the treatment, which might be an expense, inventory, equipment, a prepayment or an accrual. Do not wait for the formal P&L entry to plan the cash, but do not manufacture an expense just to force a future purchase into a report either.
What belongs in an open purchase order cash commitment register?
Record the vendor, order line, original amount, deposits, amounts received, amounts billed, remaining unbilled amount, expected delivery, payment terms and a named owner. Work at the line level, since an order can be partly delivered and partly invoiced, and keep tentative or unsigned requests in a scenario rather than committed purchases.
How do I avoid double counting purchase orders and accounts payable in the cash forecast?
Forecast the billed portion in the AP schedule and keep only the unbilled remainder in the commitment layer. As an unbilled order becomes a bill, move it into AP rather than adding another payment. Use a unique order and line reference so each expected payment appears only once in the cash forecast.
How much future cash do the open purchase orders in the example commit?
The three hypothetical orders total $90,000, with $22,000 of deposits already paid and $12,000 billed in AP, leaving $56,000 unbilled. Future cash outflow is $68,000, the $12,000 in AP plus the $56,000 of unbilled commitments. Allocate that total to actual expected weeks to see collisions with payroll or tax funding.
Does paying a vendor deposit remove the purchase order from the cash forecast?
No. A deposit is a past cash outflow that funds only part of the order. In the example, the $40,000 equipment order had a $10,000 deposit, leaving $30,000 of remaining unbilled cash. Subtract each deposit only from the amount it actually funds and keep the remaining purchase order obligation visible.
What should I do about old open purchase orders that never closed?
Investigate them instead of ignoring them. Some are stale records after completed purchases, while others are real obligations whose delivery slipped, and those cases require opposite corrections. Ask which orders can actually be delayed or cancelled and at what cost, and do not mark an order cancelled until confirmation supports it.
How often should the purchase order commitment register be reviewed?
Update the register with purchasing and receiving changes and reconcile it to AP during the weekly cash meeting. Show opening usable cash, expected receipts, AP payments and the separate unbilled commitment layer, with planned but unapproved purchases as a scenario. Test earlier delivery dates and payment-on-shipment terms as well.