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

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.


Info

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.

Idea

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. 
    • 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

    Nederlandse Hulpbronnen


      • Recent Topics

      • Convert 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; //
      • Redirect after submission is not working after a few submission

        I have setup redirect url correctly and everything works as expected. However, it seems that there's a limit to the number of submissions before the redirect stops working. After the "limit" is reached, the page redirects to a seemingly zoho hosted page,
      • Enhancement 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 feature
      • Marketing Tip #8: Run limited-time offers

        Exclusive offers that don't last long make shoppers purchase right away instead of waiting. Run a flash sale or limited-time discount to convert interest into sales. Try this today: Set up a "Buy X Get Y" coupon in Zoho Commerce valid for a limited time
      • 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
      • Zoho Projects - Email notification relabelling of modules not present on default templates

        Hi Projects Team, I noticed that in the default email template notification, the word "bug" was not renamed to the lable I am using in my system. As many users may used the Bugs modules for various purposes including Changes, Revisions, Issues, etc...
      • Include 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 able
      • Loops in Deluge

        Hi, Can someone tell me how I do a simple loop in deluge? For example, if i have a variable "X" containing a number of loops to perform, i would like to perform an action X amount of times. X = 10; do while (Y < X){       // ... do something } to further explain, the equivalent in PHP of what i am trying to acheive would be: $X = 20; for($Y = 1; $Y < $X; $Y++ ){       // ... do something } Thanks
      • 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 block
      • Zoho Projects - Reply by email to @ mentions posted on the Feed.

        When mentioning someone on the Feed (Status), it would be great if that mentioned person could reply to the email notification to update the Feed thread.
      • Product Updates in Zoho Workplace applications | October 2025

        Hello Workplace Community, Let’s take a look at the new features and enhancements that went live across all Workplace applications this October. Zoho Mail Create Signature from Compose window You can now effortlessly create a Signature using the Create
      • Subform data to Sheets

        I have been trying to setup a Zoho Flow automation to bring any Subform input to a Zoho Sheets but it seems impossible to post the subform entries to a Zoho Sheet. Is there any way to do it via Zoho Sheet API? https://www.zoho.com/sheet/help/api/v2/#CONTENT-Insert-row-with-JSON-data
      • Edit Contact Roles in the Potentials Mod

        New to ZOHO so I need some help. I work the same people on different projects concurrency. Their contact info remains the same but their role changes from project to project. In the Potential Mod you can pick contacts and assign a Role to them. I know
      • Is there a way to disable the Activity Reminders Pop-Up Window every time I log in?

        Just wondering if there is a setting to disable the window from opening every time I open my CRM? Thanks Chris
      • Rich-text fields in Zoho CRM

        Hello everyone, We're thrilled to announce an important enhancement that will significantly enhance the readability and formatting capabilities of your information: rich text options for multi-line fields. With this update, you can now enjoy a more versatile
      • Font Size 11 - Zoho CRM Email Templates

        Our company communicates with our vendors exclusively using Calibri Font Size 11, as this is the standard formatting for professional emails. Since the CRM only allows for the selection of font sizes 10 & 12, we have been unable to utilize the CRM email
      • Error 400 Booking

        Added a custom domain to Booking. Am Getting a SSL Error that has some other domain on the SSL and giving a 400 error. Followed instructions and it stated it verified our domain.. However it is not working. Please Help!
      • Zoho Projects - Email Notifications for Feed Updates

        Hi Projects Team, I'm working with a client who wants a simple way to communicate with their customers on projects. Getting the customer to add comments to Tasks or Bug records is not ideal, as we need a way which is easy with minimal training, and has
      • Zoho Analytics Export API

        Hi Team, I’m working on some integration tasks and wanted to confirm if it’s possible to retrieve a Zoho Analytics table as JSON data using a Deluge script. I’ve already stored my custom data from multiple sources and combined it into a single source.
      • Request to Remove LinkedIn Verification from My Emai

        I would like to submit a complaint regarding my Zoho Mail account. I previously used this email address to verify a LinkedIn account, but that LinkedIn account has now been closed. I need to remove or cancel the verification associated with the closed
      • Introducing the all-new email parser!

        Greetings, We are pleased to introduce to you, a brand-new, upgraded version of the Zoho CRM Email Parser, which is packed with fresh features and has been completely redesigned to meet latest customers needs and their business requirements. On that note,
      • Zoho Projects - Refine Access to Collaboration Menu

        Hi Projects Team, I noticed that Calendar, Chat and Meeting menu options in the Collaboration section are visible to client users, even when they don't have access to the features. This could be confusing and frustrating, because if it's there you expect
      • Extracting 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 dynamically
      • 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 troubleshoot
      • Inactive 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 specifically
      • How to calculate GST based on "Ship To Address"

        We into the interior designing work, providing "Works Contract Services" to our clients across India. We are registered under GST in Maharashtra state. For works contract services as per the GST rule, we need to decide place of supply based on "Ship to
      • I NEED TO NUMBER TO TEXT NO HERE

        =NUMBERTEXT NEEED
      • Auto-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;
      • Python - 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 already
      • API 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?) Thanks
      • Calendar 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?
      • 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 supposed
      • Contrôles 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 informations
      • 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 expected
      • Zoho 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.
      • 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 favorite
      • How 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.
      • Cannot connect mail accounts to Thunderbird

        Hi Support - I'm attempting to add my mail accounts to Thunderbird but I'm getting an unable to login to server error. I tried to use the password associated with my account I received the unable to login error. So I went into Zoho Accounts and generate
      • Next Page