The short answer
Commitment accounting reserves grant money the moment a requisition or purchase order is raised, not when the invoice arrives. GrantFlow 365 records each commitment against the grant, converts it to spend as the invoice posts, and can stop, escalate or warn when a budget would be exceeded.
Spending beyond an approved donor line is one of the quickest routes to a disallowed cost, and the organisation then has to absorb the overspend from unrestricted reserves. A general ledger records expenses after an invoice is received or paid, which is too late to prevent it.
This is commitment accounting for NGOs, also called encumbrance accounting in Business Central, applied as NGO budget control software.
Actual, committed and available
To keep control, finance needs three figures against every budget line.
Approved budget
The donor-approved ceiling for the line.
Committed
Money tied up in open requisitions and purchase orders that are not yet invoiced.
Actual
Invoiced and posted spend.
Available budget = approved budget - (actual spend + committed funds)
Without commitment accounting a system subtracts only actual spend. If $20,000 sits in outstanding purchase orders, it still reports that $20,000 is free to spend.
How GrantFlow 365 controls commitments
Budget enforcement at the requisition
Remaining funds are checked as the request is raised.
- Spend is checked against project-activity budgets and, optionally, the grant budget
- Hard stop blocks the request, approval required routes it for approval, warning only lets it through with a message
- Purchase requisitions are linked to grants, with budget utilisation and overrun views
Commitments tracked through the lifecycle
Entries update as the purchase progresses.
- A requisition records a commitment
- When the requisition converts to a purchase order, the commitment moves with it
- When the invoice posts, the commitment is released and the actual spend is recorded
The encumbrance lifecycle
- RequisitionA purchase requisition records a commitment on the grant line.
- ApprovalThe requisition is approved and converted to a purchase order.
- OrderThe purchase order holds the commitment.
- InvoiceThe vendor invoice posts: the commitment is released and the actual spend recorded.
Visibility for programme managers
See it in the system
Non-finance managers read their own position.
- A grant manager role centre in Business Central
- Budget utilisation and overrun views by grant and project activity
- Spend entries showing commitment, consumption and release
Take it elsewhere
The same data feeds the tools teams use.
- A spend audit by grant, exported to Excel
- Data published through OData for Power BI
The closeout hub lists open items and documents when a grant ends, so open commitments are reviewed before the grant is closed. Year-end treatment of commitments on multi-year grants is confirmed in design.
What changes for your organisation
Overruns stopped early
Control applies as spend is raised, before a vendor is committed.
No end-of-grant scramble
Budget checks happen daily, not in the last quarter.
Faster procurement
Budget verification is automatic, so field officers wait less.
To see commitment control on one of your own grants, book a GrantFlow 365 demo or read the GrantFlow 365 product page.
Keep reading
Donor compliance and reporting
Budget control, cost rules and donor packs. Read the guide
The grant lifecycle
From opportunity to closeout in one record. Read the guide
Business Central vs QuickBooks and Sage Intacct
A practical comparison for non-profits. Read the guide
Frequently asked questions
What is commitment accounting for NGOs?
It reserves grant funds when a requisition or purchase order is raised, so the available budget reflects committed money as well as actual spend.
Can GrantFlow 365 block a purchase that exceeds a grant budget?
Yes. Over-budget handling can be a hard stop, approval required or warning only, checked at project activity and optionally the grant budget.
How do commitments change when an invoice posts?
A requisition records a commitment, it moves to the purchase order, and when the invoice posts the commitment is released and the actual spend recorded.