Cost shape and forecasting
Forecastable vs variable spend
Forecastable spend is fixed by an agreement for the period: fixed fees, committed quantities, scheduled amounts. Variable spend depends on what happens, such as consumption or time actually worked. Reporting them as one total destroys the distinction that makes either useful, because the reader cannot tell how much of the figure is a commitment and how much is a projection.
The Vendor Squeezer team. Last reviewed 2026-08-08. General guidance on contract structures, not legal advice, and not a statement about any particular vendor's terms.
The two questions a total is asked
A spend total is usually asked one of two questions. What are we obliged to pay, which drives budget and cash. And what will we probably pay, which drives planning. The first is knowable, the second is a projection, and one number cannot be both.
Splitting them also makes the total more defensible. A committed figure can be traced to agreements. A variable figure carries an assumption, and stating the assumption is what lets someone else check it.
Deriving the split rather than declaring it
Which side a contract falls on follows from its pricing model rather than from an opinion, which means the split can be derived rather than maintained by hand.
| Pricing model | Side | Why |
|---|---|---|
| Fixed | Forecastable | The amount is stated for the period |
| Per unit with committed quantity | Forecastable | Rate and quantity are both fixed |
| Milestone based | Forecastable | Amounts are defined, timing may move |
| Usage based | Variable | Depends on consumption not yet known |
| Time and materials | Variable | Depends on effort not yet spent |
| Hybrid | Both | Split the platform fee from the consumption element |
| Unknown | Neither | Report as not established rather than assigning it |
Minimum commitments sit on the forecastable side
A usage-based agreement with a minimum commitment has a forecastable floor even though the total is variable. The floor is owed regardless, so it belongs in the committed figure, with only the amount above it treated as variable. Splitting it that way is more accurate than putting the whole agreement on either side.
Questions to ask about your own agreement
- 1.How much of this portfolio is committed by agreement for the coming period?
- 2.How much is consumption-based, and what assumption is the projection using?
- 3.How many contracts have no pricing model recorded at all?
- 4.Do any variable agreements carry a minimum that belongs in the committed figure?
- 5.Does the number I am about to present say which parts are which?
Common questions
Does this mean I cannot give one total?
You can, as long as it is presented as a range or with the split shown alongside it. What causes damage is a single point figure whose composition is invisible.
Where does an unknown pricing model go?
Neither side. Count those contracts as records with pricing not established, so the gap is visible as work rather than being absorbed into a number.
Put this against your own vendors
Record the term, the notice deadline, and the exit cost against the vendor once, and the next renewal review starts from an answer instead of a search. Free while in early access.