Revenue Management: #7 Revenue Recognition in Construction & Real Estate Industry

If you are in the construction or real estate business, you are used to long project timelines and progressive invoicing to keep up with your billing. But when does revenue get recognized? Will it happen when the contract gets signed? At different milestones or only at the end of the project? Each phase has its own pace, and the revenue needs to be tracked carefully throughout the end.

How do long-term projects and contract-driven businesses recognize revenue?   

Revenue Recognition Scenario in Construction & Real Estate

With long-term projects and multiple deliverables in place, construction and real estate businesses often stretch the process across months or even years. Revenue recognition in these industries is less about timing and more about progress.

Long-Term, Multi-Phase Projects

Construction projects often span many months or years. Recognizing revenue based solely on billing milestones (say 30% upfront, 40% midway, and 30% on completion) doesn't reflect the actual progress or value delivered. Companies must track and report revenue based on performance progress, not payment terms.

Example: $5,00,000 real estate development, $1,00,000 recognized after land acquisition, $2,00,000 during construction in progress and remaining during handover.

Percentage of Completion Method

This industry often uses the percentage of completion method, where revenue is recognized based on the cost incurred or work completed relative to the entire project. Misjudging this percentage can result in misstated finances.

Example: For a $1 million project, if 40% of the work is completed, $4,00,000 is recognized regardless of its payment terms.

Retainage Clauses

In construction, it's common for clients to withhold a portion of the contract until completion. Although the work is completed, the revenue may remain deferred depending on the contract terms.

Example: 10% of the $2,00,000 contract is retained as a deposit. That is, $20,000 will be kept as deferred revenue until completion.

Change Orders and Delayed Delivery

Projects might include design, foundation, electrical, plumbing, and landscaping. Each component might have a separate delivery schedule and must be tracked as a performance obligation. When the scope changes during the progress, companies must reassess the total contract value and the revenue allocation accordingly. On the other hand, if the project execution is postponed, all the revenue earned will remain deferred even if an upfront payment was made.

Example: If a client makes a $5,00,000 upfront payment but the work is delayed, the entire amount will stay in deferred revenue until the obligations are fulfilled.

Proper recognition in this space depends more on accurately tracking project progress and billing terms. It's hard for any business to track all these manually, as any deviation in this might lead to the risk of under- or over-recognition. Sometimes, automated recognition rules may not fit a construction contract, specifically when project timelines are uncertain, milestones don't follow a uniform schedule, or the scope frequently changes.

Businesses may prefer manual revenue recognition to mitigate the risk of miscalculation or inappropriate revenue recognition. This ensures revenue is recorded only when specific deliverables are actually completed.

Scenario:

A construction company signs a $600,000 contract to build a commercial warehouse. The client pays the full payment upfront, but the contract specifies that revenue will only be recognized at key stages of the project completion and not based on the period.

Project stages are defined as:

•  Site Preparation & Foundation: $100,000

• Structural Framework: 30% of contract value

• Roofing & Utilities Installations: 40% of the contract value

• Interior Finishing & Handover over: Remaining balance
  

Revenue Recognition with Zoho Billing

Zoho Billing enables businesses like the one above to create flexible revenue recognition rules tied to the project progress and with several deliverables.

Companies rely on manual revenue recognition in most construction projects because project timelines and deliverables are often unpredictable. Manual recognition ensures revenue is recorded only when specific milestones are completed. Automated rules like the percentage of completed or scheduled milestones can still be configured where timelines are more predictable, but manual recognition remains the default approach in this industry. In such cases, rules don't need to be pre-configured; the revenue is recognized manually when the milestone is completed.

Reports in Zoho Billing

At the end of the project, recognition happens only at milestone completions based on the manual entry made by the project management team.

Recognised Revenue Report: 

Phases	Completion Date	Recognized Revenue
Site Preparation & Foundation	15/Jan/2025	$100,000
Structural Framework	10/Mar/2025	$180,000
Roofing & Utilities Installation	25/May/2025	$240,000
Interior Completion & Handover	30/Jul/2025	$80,000
Total Recognized		$600,000

 

Deferred Revenue Report: 

Month	Deferred Amount
Jan 2025	$500,000
Feb 2025	$500,000
Mar 2025	$320,000
Apr 2025	$320,000
May 2025	$80,000
Jun 2025	$80,000
Jul 2025	$0

 

Revenue Waterfall Report

Billing Date	Total Billed	Jan 2025	Feb 2025	Mar 2025	Apr 2025	May 2025	Jun 2025	Jul 2025	Recognized Revenue	Deferred Revenue
Jan 2025	$600,000	$100,000	$0	$180,000	$0	$240,000	$0	$80,000	$600,000	$0

 

Zoho Billing can efficiently handle change orders, as revenue is recognized manually (Manual Recognition Method). It also allows contract amendments and dynamic revenue reallocation based on project alignment.

Best Practices for Construction & Real Estate Firms' Revenue Recognition

• Break Down Phases as Obligations: Identify architecture and construction as distinct deliverable components.
• Use Percentage of Completion Metrics: Set the base recognition based on cost or time progress, not on the invoicing period.
• Handle Change Orders: Adjust the revenue schedule dynamically when the scope of the project changes. 
  

Up Next: Revenue Recognition in EduTech & Online Training Platforms

Previous: Revenue Recognition in the Professional Services Industry

• Topic Participants

• Hari | Zoho Billing

  

• Sticky Posts

• Community Learning Series | Digest #5 — September 2020

  Dear customers, We're happy to bring you the September edition of our #CommunityDigest! Keep track of your subscription KPIs right from your smartphone: Last month, we enhanced our Android mobile app to help our customers get daily updates on their business health. We got to know from a lot of customers that this has made their job much more easier because they no longer have to keep a reminder to manually check on the previous day's revenue or activations. If you have not downloaded it yet, here's

• Community Learning Series | Digest #4 - August 2020

  Dear customers, We hope you're staying safe and healthy. I'm happy to bring you the fourth edition of our #CommunityDigest with some brand-new updates from us. 1. Daily Business Updates (for Android users) The Zoho Subscriptions Android app has got a cool new update: You can now get a push notification to your smartphone that lets you know how many activations and cancellations have taken place, and what's the net revenue for the previous day. The best part is, you can tell the app when exactly you

• Community Learning Series | Digest #3 - July 2020

  Dear customers, We hope you're staying safe and healthy. We're glad to bring you the July edition of our #CommunityDigest. New community members can view our previous newsletters here. This time, we have two major updates and three interesting topics for you: 1. Zoho Subscriptions Developer Community Since the inception of Zoho Subscriptions, our team believed that the recurring billing platform we provide should be able to offer an extensive API library that empowers businesses to automate most

• Introducing: Community Learning Series | Digest #1 - May 2020

  Dear customers, We hope you are staying safe and healthy. Helping businesses manage their customer subscriptions more efficiently has always been, and always will be, our goal at Zoho Subscriptions. We strongly believe this is possible if we grow together as a community and share what we know with each other. To nurture this shared learning experience, here is our brand-new Community Learning Series! ​ Welcome to the first edition of our digest! Each edition of our community digest includes guides

• Recent Topics

• Zoho CRM - Calendar Cards View - Let Users Decide What Is Displayed On Calendar Entries

  Imagine planning your week of face-to-face meetings across three counties. You’re trying to group appointments by location to make the best use of your time, but Zoho CRM’s calendar doesn’t show where each meeting is happening. You’re left trying to remember

• Set to Review for all

  We are testing the use of Writer as part of an internal review process for statement of work documents and have found that when the document is changed from Compose to Review by one person, that is not reflected for all others who view the document. Is

• Dashboard Autorefesh

  Good day, I am a dashboard that displays the number of tickets based on "Product Name". This dashboard is displayed on a big TV for the team to monitor. Can the dashboard auto-refresh every few minutes to display the new values? Currently, we have closed

• Deferred/ Unearned revenue

  Dear Zoho Team, Just in case you have missed out my query posted few days ago: We issue invoices relating to 12-month web hosting service. When we issue the invoice, we should record the entire amount of the invoice as DEFERRED/UNEARNED REVENUE (ie. $10

• Report Hover Setting

  Would be great if we will able to show information to the user while hovering a record in a report.

• Bigin Android app update: Zoho Books integration

  Hello everyone! We’re excited to introduce Zoho Books integration on the latest version(v1.8.5) Bigin Android app. Once the integration is completed in the web(bigin.zoho.com), the Zoho Books tab will be visible in detail View of Contacts, Companies,

• Agent assignment filter?

  Godo day, We are starting to play with FSM to see if it's going to work for our needs. Now so far we have found that it's very restrcitve in the field department you you have layout rules or can't even hide fields depending on the users roles. We can't

• Audit Log enhancements: Increased retention period, better user visibility, and more

  Hello everyone, The Audit Log brings in the following enhancements which improve the overall ability to manage data. Why did we make these updates? Extended Data Retention: Audit data can now be filtered and exported for a 60-day period, doubling the

• Question Regarding Managing Sale Items in Zoho Books

  Good day, I was wondering about something. Right now, Zoho Books doesn’t seem to have a way to flag certain items as being on sale. For example, if I want a list of specific items to be on sale from October 1 to October 12, the user would have to export

• [WEBINAR] Smooth year-end closure with Zoho Books (KENYA)

  Hello there, This webinar is for all Kenyan businesses looking to wrap up their financial year smoothly! Join our free session to learn how Zoho Books can simplify your year-end process. What to expect from this webinar: - All the latest updates in Zoho

• System flaws and lack of response from Zoho

  I have had to go on here as no-one is replying to my emails regarding my problem (been 10 days and no email reply) and your chat facility online through your Zoho Books software opens and closes immediately, so not functioning properly. I actually called

• Customer Grouping

  Hi, how can I group multiple customers into single group. So that I can have idea of accounts receivables of all the customers in single group. Like if there are multiple subsidiaries of same company we have having a business with, and want to view the

• Two currencies

  More and more I am finding that internattional payments' fees are unpredictable. I would like, on my invoices that are in a foreign currency (eg. USD$ or EUR€) for there to be a GBP£ TOTAL display alongside the invoice's currency total. This would make

• Zoho Books | Product updates | September 2025

  Hello users, We’ve rolled out new features and enhancements in Zoho Books. From PayNow payment method to applying journal credits to invoices and bills in other locations, explore the updates designed to enhance your bookkeeping experience. Integrate

• GST Slabs Redefined: Stay Compliant Using Zoho Books!

  Hello Everyone! The Government of India is rolling out new GST rates, a major reform aimed at simplifying the current tax structure starting 22 September 2025. GST will move from four slabs (5%, 12%, 18%, 28%) to two main slabs (5% and 18%), plus a special

• Zoho Books | Product updates | October 2025

  Hello users, We’ve rolled out new features and enhancements in Zoho Books. From iOS 26 updates to viewing reports as charts, explore the updates designed to enhance your bookkeeping experience. Zoho Books Updates for Apple Devices At WWDC 2025, Apple

• Need Inactive accounts to be visible in Reports in Zoho Books

  I N=need Inactive accounts to be visible in Reports in Zoho Books to do recons of the accounts but when i see the same they are not visible in the Accountant - Account Transactions report

• Edit item custom fields

  Getting this error : Transactions have been created with the custom field. Hence it cannot be deleted. Not trying to delete it, just trying to change which modules to show in or to not show at all in transactions !

• Zoho Books - How to Invoke a Custom Function in Schedulers

  We have multiple schedulers that send emails to customers in batches. Currently, we are maintaining the same code across several schedulers. Is it possible to use a custom function inside a scheduler script? If yes, how can we invoke the custom function

• Use Zoho Books to bill for work done in Zoho Desk??

  I'm trying to see if something is possible (and if yes, how). We use Zoho One to manage our business. We have a lot of clients that will put in a ticket (via portal) to have work done. Out techs will pick up the ticket, do the work, and then log the time

• Zoho Finance Suite - Customer Custom Tabs - Dynamic Link

  Hi Finance Suite team, When creating a Custom Tab for a Client Portal, there is no option to add dynamic parameters. This would be very helpful for adding Zoho Analytics dashboards which can be dynamically filtered through the URL to only show information

• Modular Permission Levels

  We need more modular Permissions per module in Books we have 2 use cases that are creating problems We need per module export permission we have a use case where users should be able to view the sales orders but not export it, but they can export other

• Blueprint or Validation Rules for Invoices in Zoho Books

  Can I implement Blueprint or Validation Rules for Invoices in Zoho Books? Example, use case could be, Agent confirms from client that payment is done, but bank only syncs transactions tomorrow. in this case, Agent can update invoice status to done, and

• Feature Enhancement Request – Text Formatting Options in Item Description (Zoho Books/Quotes Module)

  Dear Zoho Development Team, Greetings from Radiant360 Integrated Technical Services LLC. We would like to bring to your attention a functional limitation we've encountered within the Item Table / Quote Description section of Zoho Books (and Zoho CRM Quotes).

• Add Option to Mass Dispatch by User

  Hello! We are using the dispatch console to dispatch service appointments to our service ressources. Right now, the process is our dispatcher verifies each ressource's route for the day and dispatches it after validation. Sadly, there doesn't seem to

• Bank Receipt Catagorization

  Hi, how can I match a bank deposit to multiple customer's invoices ? For e.g. A single person paid to us on behalf of different five customers. I need to keep the separated invoices for each customer

• Per Level Approval for admins

  We need Process admins like Zoho CRM in Zoho Books for per stage approval Currently in books, admins only have the option for Final Approval But for example, in cases like when an employee is on leave, we can't just approval one level we only have option

• Payment on a past due balance

  Scenario: Customer is past due on their account for 4 months. We suspend their billing in Zoho books. Customer finally logs into the portal and enters a new credit card. We associate that cardwith their subscription, which will permit the card to be used

• How to export all line-item descriptions for a specific item in Zoho Books?

  I am trying to audit a specific item (“Item X”) that has been invoiced multiple times with different line-level descriptions. Here’s the situation: I am using Zoho Books (Professional). Each invoice may contain the same item but with different descriptions

• List of hidden features

  Hi Friends, I had another support chat today and low and behold the feature that I wanted just simply needed to be "enabled". I thought I'd share, and maybe see if others had some similar experiences. 1. This one is from 5 ish years ago. I asked if there

• How to change a BAS that has been filed

  I have discovered that a group of expense transactions were accidentally placed in a asset account rather than an expense account. As a result I need to adjust the transaction and consequently most of my BAS to correct the error. Because the BAS have

• How to Export PDF with a custom Template

  I need to export Sales Order with a Custom Template I have created How can I do it? I see an API to export the PDF but how can I choose which template to choose to generate the PDF

• Associate email with a potential or project.

  I have a pivotal requirement to associate emails from various suppliers (contacts) with different potentials or projects, on an email by email basis as they come in. This question appears to have been raised before but I cannot find a definitive yes "it can be done". Could anyone please tell me, yes or no.  If the later I can stop wasting time and look at alternative crm systems. I would love not to have to do this. Thanks in advance.

• MTA - BAD IP reputation by outlook/hotmail

  Messages to Microsoft email servers are bouncing back due to poor reputation. Message: 4.7.650 The mail server [136.143.188.206] has been temporarily rate limited due to IP reputation. For e-mail delivery information see https://postmaster.live.com (S775)

• Function with Search Records was working until a few weeks ago, around when "Connected Records" was released

  I have a custom function that has been running for nearly a year now, which suddenly stopped working around the time Zoho released the "Connected Records" update. The function is no longer finding the record using the searchRecords function. I've changed

• Is CRM On Premise available

  Hi Zoho team, Can you please let me know that CRM Zoho is available for On Premise as well? Thanks, Devashish

• How to sync from Zoho Projects into an existing Sprint in Zoho Sprints?

  Hi I have managed to integrate Zoho Projects with Zoho Sprints and I can see that the integration works as a project was created in Zoho Sprints. But, what I would like to do is to sync into an existing Zoho Sprints project. Is there a way to make that

• Online Assessment or any aptitude test

  This video is really helpful! I have one question — if I share an assessment form link (through email or with the application form on my career page), how does Zoho Recruit evaluate it? Can a candidate use Google or external help while taking the test,

• Editing the Ticket Properties column

  This is going to sound like a dumb question, but I cannot figure out how to configure/edit the sections (and their fields) in this column: For example, we have a custom "Resolution" field, which parked itself in the "Ticket Information" section of this

• Need a way to secure Prefill URLs in Zoho Forms (hide or encrypt prefilled values)

  Hi everyone, I often use Zoho Forms with prefilled URLs to simplify the user experience — for example: https://forms.zohopublic.com/.../form?Name=David&Amount=300 However, the problem is that all prefilled values are visible and editable in the link.

• Next Page