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.
Access your files securely from anywhere
New to Zoho Recruit?
Zoho Developer Community
New to Zoho LandingPage?
Zoho LandingPage Resources
New to Zoho Survey?
New to Zoho CRM Plus?
Deliver unforgettable customer experiences
New to Zoho CRM Plus?
Deliver unforgettable customer experiences
New to Zoho Marketing Plus?
Everything you need to run your marketing
New to Zoho Marketing Plus?
Everything you need to run your marketing
New to Bigin?
Topic Participants
Hari Hara Sudhan. S
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'sCommunity 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 youCommunity 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 mostIntroducing: 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
New to Zoho TeamInbox?
Zoho TeamInbox Resources
Zoho CRM Plus Resources
Zoho Books Resources
Zoho Subscriptions Resources
Zoho Projects Resources
Zoho Sprints Resources
Qntrl Resources
Zoho Creator Resources
Zoho CRM Resources
Design. Discuss. Deliver.
Zoho Show Resources
Get Started. Write Away!
Writer is a powerful online word processor, designed for collaborative work.
Zoho CRM コンテンツ
-
オンラインヘルプ
-
Webセミナー
-
機能活用動画
-
よくある質問
-
Ebook
-
-
Zoho Campaigns
- Zoho サービスのWebセミナー
その他のサービス コンテンツ
Nederlandse Hulpbronnen
ご検討中の方
Recent Topics
Add Comprehensive Accessibility Features to Zoho Writer
Hello Zoho Writer Team, We hope you are doing well. We would like to submit a feature request to enhance Zoho Writer with a full set of accessibility tools, similar to the accessibility options already available in the Zoho Desk agent interface. 🚧 Current[Webinar] Simplifying document workflows in financial services with Zoho Writer
Creating, sharing, and distributing complex documents are constant challenges in the financial services industry. That's why our next webinar is focused on how to simplify these document workflows. Join us on April 10, 2025, for a Zoho Writer webinar[Zoho Writer Webinar] Learn how to simplify your HR operations: Part 2
Hi Zoho Writer users, We're excited to announce the Zoho Writer webinar for July 2024: Learn how Zoho Writer can simplify your HR operations: Part 2. This webinar will focus on how Zoho Writer can help HR teams streamline and automate their entire hiring[Zoho Writer Webinar] Learn how to simplify your day-to-day HR operations
Hi Zoho Writer users, We're excited to announce the Zoho Writer webinar for June 2024: Learn how Zoho Writer can simplify your day-to-day HR operations. This webinar will focus on how to automate your entire hiring process and generate various types ofBranding of native system emails
Make system emails adjustable in terms of branding. We want our system to be completely white label, because it is not a CRM anymore, it's way more than that. We are following the strategy of "CRM for everyone" to use the CRM in all departments, not onlySupport “Never End” Option for Recurring Meetings in Zoho Meeting
Hello Zoho Meeting Team, Hope you are doing well. We would like to request support for creating recurring meetings with no end date in Zoho Meeting. Currently, when scheduling a recurring meeting, Zoho Meeting requires us to select a specific end date.[Important announcement] Removal of Zoho Writer's DocuFiller Add-on
Hi users, Effective 21st Feb. 2025, we will be removing the DocuFiller add-on for Zoho Writer's Fillable Templates. From that point on, the add-on's functionalities, such as sharing or publishing fillable forms for data collection and receiving submissionsSend Automated WhatsApp Messages and Leverage the Improved WhatsApp Templates
Greetings, I hope all of you are doing well. We're excited to announce a major upgrade to Bigin's WhatsApp integration that brings more flexibility, interactivity, and automation to your customer messaging. WhatsApp message automation You can now useWeekly Tips: Manage External Images in Zoho Mail
When you receive emails every day, whether from clients, newsletters, or services, many of them contain external images that automatically load when you open the message. While this can make emails look more engaging, it can also impact your privacy andImplementing a Self-Invoicing/Vendor Portal in Zoho Creator
Hello Zoho Community / Creator Experts, We would like to build a Self-Invoicing Portal (Vendor Portal) in Zoho Creator for our external contractors. Our goal is to allow approved contractors to log in, submit their invoice details (hours worked, projectFunction #32: Schedule low stock notifications on a timely basis to specific users of the organization
Hello everyone and welcome back to our series! For a business that heavily relies on inventory, monitoring the stock levels and getting timely notifications of low stock items will ensure a smooth sail. Zoho Books allows you to always keep a check onIs it really true that I can't set the default 'deposit to' account in 2025?
I've been using Books for 7 years and the default account has never been a problem. I usually manually reconcile invoices and have never had a thought about which account. It has always been my account. However, I recently noticed that for the past 4SINCH HUB MESSAGEMEDIA with ZOHO DESK
1) what I need from MessageMedia, 2) what I want to confirm on the Zoho Desk Dev Forum. MessageMedia – needs and requirements Goal: Send SMS from a Zoho Desk widget for EU users. Auth: HTTP Basic (API Key + Secret). Keys must not live in the browser.Function #46: Auto-Calculate Sales Margin on a Quote
Welcome back everyone! Last week's function was about displaying the discount amount in words. This week, it's going to be about automatically calculating the sales margin for a particular quote, sales order or an invoice. Business scenario Where there is sales, there's also evaluation and competition between sales reps. A healthy rivalry helps to better motivate your employees to do smart work and close deals faster and more efficiently. But how does a sales rep get evaluated? 90% of the time, it'sInvalid URL error when embedded sending url into iframe for my website when using in another region
Hi team, My site is currently working on integrating your signature feature as part of the system functionality, it's working great but recently there's been a problem like this: After successfully creating the document, i will embed a sending url intoNew features released: Data from Picture for Web, Pattern Fill, and Translation in Zoho Sheet!
Hello Sheet users, In 2024, the Zoho Sheet team focused on research and development to bring new features that add to functionalities like productivity, data management, collaboration, and more. This year, we're all set to roll them out incrementallyKaizen #59 - Creating alerts and custom messages using Client Script
Hello everyone! We are happy to resume our Zoho CRM Developer Community series - The Kaizen series! Welcome back to the new start of Kaizen! This post is about Client Script and its simple use cases involving ZDK Client functions. What is Client Script?[Webinar] Zoho Writer for content creators and publishing houses
Managing multiple drafts, edits, and client reviews doesn't have to slow you down. Join our upcoming webinar to see how Zoho Writer helps content creators and publishing houses create, edit, and publish seamlessly—all in one place. You'll learn how to:Universal search
Hi, it would be useful if the search bar was universal-so if you entered a term, it would bring up results from contacts, candidates, clients etc all at the same time (but broken down under the relevant headings)Attachment reminder?
My team and I often need to attach files to our messages, e.g. an explanatory screenshot or a shipping label. More often that I want to admit I mention the attachment but forget to actually attach it. Some email clients have a check-for-missing-attachmentsZIA in Zoho Cliq
Is It possible to use the ZIA feature from Zoho Analytics in the Zoho Cliq?Automating CRM backup storage?
Hi there, We've recently set up automatic backups for our Zoho CRM account. We were hoping that the backup functionality would not require any manual work on our end, but it seems that we are always required to download the backups ourselves, store them,Multiple upload field CRM
I desperately need the functionality to add more than one upload field to web to contacts form. How can I do this?Critical Need for Global Search in Zoho FSM
Hello Zoho FSM Team, We are currently in the process of deciding whether to fully transition to Zoho FSM for managing our field service operations. At present, our team actively uses Zoho Desk (with over 50 users) and Service Fusion, which we are consideringCollections Management: # 1 Payment Collection is All About Convenience
"Sir, can you come tomorrow? My manager wasn't available for the cheque sign-off", the customer said, avoiding eye contact. Ravi forced a polite smile, but inside, he felt a sense of defeat. He had already visited the customer's office twice in the lastCan the Product Image on the Quote Template be enlarged
Hello, I am editing the Quote Template and added ${Products.Product Image} to the line item and the image comes up but it is very tiny. Is there anyway that you can resize this to be larger? Any help would be great! ThanksAudio/video quality issues with Zoho Meeting – Any roadmap for improvement?
Hi Zoho Team, We’ve been using Zoho Meeting for both internal and external meetings, and unfortunately, the experience has been consistently poor. The video and audio quality are so unreliable that it often renders meetings ineffective—especially withCash based businesses cannot use the new fixed asset module
Hello all, If your bookkeeping is reporting in cash, you cannot use the new fixed acid module, as it does all the depreciation bookings accrual and not cash. This is definitive and you can't turn them into a cash booking. They will never appear in yourZoho Learn & Zoho Connect
Hi, Is there a way to sync the knowledge base we have in Zoho Learn with the manuals section is Zoho Connect? Thanks,Apply Payment Received Amount Zoho Books Invoice
Hello team here is the sample code How can apply the payment received record over a unpaid zoho books invoice. //......................... paymentID = customer_payment.get("payment_id"); organizationID = organization.get("organization_id"); paymentmaplist[Live Webinar] New in Zoho WorkDrive: AI enhancements, Data Loss Prevention, Version Controls, and more
Hello everyone, We're excited to bring you another round of powerful updates in Zoho WorkDrive! Join us on May 15 for an exclusive live webinar where we’ll unveil the latest features designed to enhance your team’s productivity, collaboration, and dataLive webinar: Streamlining legal operations: Leveraging Zoho WorkDrive for law firm success
Hello everyone, Managing legal documents across departments and jurisdictions can be complex, but it doesn’t have to be. Join us on March 6 for an exclusive webinar where we’ll show you how Zoho WorkDrive empowers legal teams to stay compliant, organized,Live Webinar: Optimizing back-office operations in the manufacturing industry to maximize profitability
Hello everyone, We’re excited to invite you to our upcoming live webinar on February 6! Discover how Zoho WorkDrive can help manufacturing businesses optimize back-office operations, improve efficiency, and boost profitability. Our product experts willLive webinar: 2024 recap of Zoho WorkDrive
Hello everyone, We’re excited to invite you to our year-end live webinar! This session will take you through the transformative features and updates we’ve introduced in Zoho WorkDrive this year, helping you streamline document management like never before.Live webinar: Explore WorkDrive's seamless integrations with key Zoho apps
Hello everyone, We’re excited to invite you to our upcoming live webinar, where we'll delve into the seamless integration of WorkDrive with other key Zoho applications! This is a fantastic opportunity to enhance your productivity and streamline your workflowsLive webinar: Getting the most out of WorkDrive in Zoho Workplace
Hello everyone, We’re excited to invite you to our upcoming live webinar, where we’ll explore how to maximize your use of WorkDrive as part of the Zoho Workplace bundle. This is a fantastic opportunity to elevate your productivity and streamline yourLive webinar: Mastering data migration, organization, and team collaboration
Hello everyone, We’re excited to invite you to our upcoming live webinar! Discover how to seamlessly migrate your data, optimize file organization, and boost team collaboration using Zoho WorkDrive’s powerful features. This is a fantastic opportunityJoin our live webinar: Explore the WorkDrive TrueSync application!
Hello everyone, We are thrilled to invite you to a live webinar focused on mastering the WorkDrive TrueSync application. Discover how to seamlessly sync your content between the cloud and your computer, ensuring smooth and efficient file management. OurZoho Creator customer portal limitation | Zoho One
I'm asking you all for any feedback as to the logic or reasoning behind drastically limiting portal users when Zoho already meters based on number of records. I'm a single-seat, Zoho One Enterprise license holder. If my portal users are going to add records, wouldn't that increase revenue for Zoho as that is how Creator is monetized? Why limit my customer portal to only THREE external users when more users would equate to more records being entered into the database?!? (See help ticket reply below.)Script Editor not an option
I am trying to apply a script to a sheet and Script Editor is not an option. I don't want to go outside Sheets to do this (like Creator) if it can be done inside Sheets.Next Page