Minimum commitment
Also called Committed spend minimum
A minimum commitment is the least you agree to pay or use over a period, whatever your actual usage turns out to be.
Why it matters to a budget owner
Vendors trade discounts for commitments. Use less than the minimum and you still pay it; use more and you pay overage or a true-up.
The minimum is the floor of your spend on that contract, so it is the forecastable part even when the rest is variable.
What to record
- The amount or quantity
- The period it applies to
- What happens to unused commitment
Frequently asked questions
Does unused commitment roll over?
Only if the contract says so. Usually unused commitment is lost at the end of the period.
General working knowledge about commercial contracts, not legal advice. Your own agreement governs.
Glossary
Look up related terms
- True-upA true-up is a periodic payment that settles the difference between what you committed to and what you actually used.
- Committed spendCommitted spend is what you are contractually bound to pay vendors, whether or not you keep using what you bought.