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.
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
Recent Topics
Zoho is blocking emails I subscribe to from one sender
About 4 months ago I stopped receiving newsletters that I subscribe to from @thedispatch.com. They tell me that zoho's server is blocking them. I've added them to my contacts list, but they're not even reaching my inbox. I don't know how to troubleshootIntroducing Formula Fields for performing dynamic calculations
Greetings, With the Formula Field, you can generate numerical calculations using provided functions and available fields, enabling you to derive dynamic data. You can utilize mathematical formulas to populate results based on the provided inputs. ThisInactive Items - Make Less Prominent by Default
Currently, when one marks an Item as "Inactive", it really doesn't do much of anything to hide it or get it out of the way. Search and reporting within Finance should, by default, hide inactive Items from standard reports, searches, etc. If one specificallyItems should display under specific warehouse
I have configured the multi warehouse but it show all the items under all warehouse which is not correct according to our business logic, so i want that items should only display under that specific warehouse not under all the warehouses not even with zero quantity. Some items should be common but not all so is there any option for that purpose so i can specific the items to its warehouse. RegardsZoho Analytics Bulk Api Import json Data
HI, I’m trying to bulk-update rows in Zoho Analytics, and below are the request and response details. I’d like to understand the required parameters for constructing a bulk API request to import or update data in a table using Deluge. Any guidance onE-Invoicing in Belgium with Zoho Billing
Starting January 1, 2026, Belgium is introducing mandatory electronic invoices (e-invoicing) for all B2B transactions between VAT-registered businesses. Invoices and credits notes must be exchanged in a prescribed digital format. How E-Invoicing worksConvert HTML to PDF & Send as Email Attachments in Zoho Creator (Deluge)
This approach is useful for sending welcome letters, instructions, or promotional offers after order creation. // 1. Define the variables using the submitted input customerName = input.Customer_Name1; orderID = input.ID; customerEmail = input.Email_Address; //Connecting zoho creator to zoho writer to send prefilled documents
i will paste the worflow below // Get user's submitted data from the form userSalary = input.Current_Salary; userCIBIL = input.CIBIL_Score; userEmail = input.Email; userName = input.Name; // You need to get the Document ID from the URL of your Zoho WriterExtracting Images from a Zoho Creator Report into a Pages
If you’ve uploaded images in a form and can see them in your report, you might also want to display those same images inside a Page (custom HTML page). This is useful for dashboards, profile pages, or any place where images should be visible dynamicallyAuto-fill New Row with Previous Row Values
rowsize = input.Order_Items.count(); for each row1 in input.Order_Items { rowsize = rowsize - 1; if(rowsize == 1) { row.Door_Model = row1.Door_Model; row.Door_Color = row1.Door_Color; row.Materials = row1.Materials;I am facing a problem with an if-else condition
If I use if, else if, and else conditions in Deluge with the same variable name, sometimes the variable causes an error because the same variable name is present in every blockWhen I click on PDF/PRINT it makes the invoice half size
When I click PDF / Print for my invoice in Zoho Books, the generated PDF appears at half size — everything is scaled down, including the logo, text, and layout. The content does not fill the page as it should. Could someone advise what causes Zoho BooksPython - code studio
Hi, I see the code studio is "coming soon". We have some files that will require some more complex transformation, is this feature far off? It appears to have been released in Zoho Analytics alreadyAPI question - adding a thread to an existing ticket
Hi Is there an API function for the customer to add to an existing ticket thread? example, customer puts in new support ticket. support replies and ask for more details. customer replies with more details -what api function is used for this (will add record append to same ticket number?) Thankssearch and Smart Bar both missing in Mail
One of the users on my account does not have the search bar at the top right or the Smart Bar at the bottom left of the desktop Mail app. Any ideas how to get those back?Why is Zoho Meeting quality so poor?
I've just moved from Office 365 to Zoho Workplace and have been generally really positive about the new platform -- nicely integrated, nice GUI, good and easy-to-understand control and customisation, and at a reasonable price. However, what is going onHide fields only for creation
Hello, I'd like to hide some fields only during the creation of a contact in Zoho CRM. In fact I have some fields that are automatically calculated thanks to an automation, so when my users create a contact I don't want them to fill those fields. I knowItems Below Reorder Point Report?
Is there a way to run a report of Items that are below the Reorder Point? I don't see this as a specific report, nor can I figure out how to customize any of the other stock reports to give me this information. Please tell me I'm missing something sQwen as the default open source Generative AI model for Zia
Hello everyone, Zia Generative AI is transitioning from Llama (8B parameters) to Qwen (30B parameters) as the default model. This means that users who were using Llama as a GenAI service will now use Qwen. This upgrade was made with a vision to enhanceCalendar week view: Today + 6
Is there anyway to have the calendar change dynamically based on the date? Due to the amount of events, we only display a week at a time, but towards the end of the week, we can no longer see ahead to next week (without changing it manually every time).How to restrict user/portal user change canvas view
Hi , I would like to restrict user / portal user change their canvas view because I hide some sensitive field for them. I dont want my user switch the canvas view that do not belong to them But seems Zoho do not provide this setting?E-Invoicing in Belgium with Zoho Books
Starting January 1, 2026, Belgium is introducing mandatory electronic invoices (e-invoicing) for all B2B transactions between VAT-registered businesses. This means that invoices and credits notes must be exchanged in a prescribed digital format. How E-InvoicingE-Invoicing in Belgium with Zoho Inventory
Starting January 1, 2026, Belgium is introducing mandatory electronic invoices (e-invoicing) for all B2B transactions between VAT-registered businesses. Invoices and credits notes must be exchanged in a prescribed digital format. How E-Invoicing WorksEnhancement Request for Multi-Asset Work Order Feature
Hello Latha, Thank you for your continued support. The multi-asset Work Order feature is extremely helpful. I did some testing based on our requirements, and during the process, I noticed a few areas where we need your team’s support to improve the featureCRM x WorkDrive: File storage for new CRM signups is now powered by WorkDrive
Availability Editions: All DCs: All Release plan: Released for new signups in all DCs. It will be enabled for existing users in a phased manner in the upcoming months. Help documentation: Documents in Zoho CRM Manage folders in Documents tab Manage filesWeekly Tips : Make collaboration effortless with Whiteboard in Zoho Mail
Working with your team often means switching between emails, notes, and other applications just to explain an idea. Maybe you are trying to sketch a layout, plan a workflow, or quickly brainstorm ideas—with text alone, things can get confusing. So howAdd 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 toIntroducing parent-child ticketing in Zoho Desk [Early access]
Hello Zoho Desk users! We have introduced the parent-child ticketing system to help customer service teams ensure efficient resolution of issues involving multiple, related tickets. You can now combine repetitive and interconnected tickets into parent-childError AS101 when adding new email alias
Hi, I am trying to add apple@(mydomain).com The error AS101 is shown while I try to add the alias.How to add to Subforms via Zapier with Zoho Writer?
I have the following layout for a Zoho Writer Document. As you can see there is a repeating subform taking in "Items". I am trying to make a Zapier integration with it, and I can see there is 1 field saying: "Items", but it does not specify how I'm supposedContrôles administratifs granulaires : un atout pour la sécurité des e-mails
La moindre erreur dans votre système de messagerie peut coûter très cher à votre entreprise, tant en argent qu’en conformité et en image de marque. Pour beaucoup d’organisations, ce risque est bien réel. Les e-mails véhiculent quotidiennement des informationsInclude the "Added Email ID" to the Filters of a Report
Hi, With a Report and lots of entries, a normal thing is to filter entries by the submitter, but that is not included in the Auto Filter of Reports and you can't add a custom filter to a Report without specifying the actual value. I would like to be ableMarketer's Space: Why mobile optimization deserves a place in your email strategy
Hello Marketers, Welcome back to Marketer's Space! Today, we'll talk about the importance of creating mobile-friendly email designs. While mobile phones were once used only to make phone calls, today they're used for almost everything, including texting,Collections Management: #6 Realign Customers who gets back In-Term
Arun stared at the subscription list on his dashboard. Another account had just been moved to Cancelled status after completing the whole dunning process. Nothing unusual, just that payment failures happen, retries fail, and cancellation is the expectedZoho Mail IP Blacklist
I need problems with send mails: Error: junk mail rejected - sender4-op-o10.zoho.com 136.143.188.10, is in RBL. Spamcop. Please remove FQDN for blacklist. Regards.I can receive but not send emails
Hello, I've been not able to send emails for almost a year now. I been using alternate email to do this. I want to know how to fix this so I can use my zoho account normally again.Setting checkbox value on template in Sign from Creator
Good day, Please help me understand how do I set a tick from a checkbox in Creator into a checkbox on a Sign template. Below is the only values on the Sign template and the code from Creator, "field_boolean_data": {}, "field_date_data": {}, "field_radio_data":The challenge of 24/7 connectivity: Being present and meeting customer expectations
Before television entered our homes, radio was our window to the world. We had to tune carefully to catch voices from distant places. When television arrived, the world began to grow smaller. We can watch rocket launches, see the goal that wins our favoriteHow to download all attachments from inbox, send, other folders in one go
Hi All, Appreciate if anyone could help me with steps for below requirement. How to download all attachments from inbox, send, other folders in one go. Even mapping to new folder will help me. Thanks in advance.Recruit paid support?
Hi all, Could anyone who has paid support package advise if it provides value for money with regards to support response times? Exploring the idea as unfortunately when we have faced issues with Recruit it has been a 7+ day timescale from reporting toNext Page