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
Nederlandse Hulpbronnen
Recent Topics
Account in Quick View Filter
I have a report that I often run against a specific Account. Every time, I have to go into the edit menu and change the Advanced Filter. I would prefer to use the Quick View Filter, but it does not allow me to use the one and only field that makes anySet Display for Numbers/Currency/etc with Client Script/Customization in Canvas List Page
Is it possible to set a display mask for a number/currency field using Client Script or customization? I have custom fields that I would like to keep the decimal places for calculation purposes, but do not need them displayed to the user. So 101.3568136.143.188.51 blocked by spamcop
Zoho mailserver seems to be blocked by spamcop. Cant send mail to my customer. Not sure what to do.🚀 WorkDrive 5.0: Evolving from a file sharing app to an intelligent content management platform: Phase 2
Hello everyone, WorkDrive's primary focus has always been to provide an intelligent and secure content management platform, simplify collaboration, and be the central repository of files for all Zoho apps. In our previous announcement, we unveiled thei keep see there is a connetion issue connecting 3rd party api on zoho when using zia
hi there , i have set up open ai api to zoho zia (copied and pasted to zoho zia) but I keep getting notificaiton "there is a connetion issue connecting 3rd party api on zoho" when using zia on top when click zia and try to type in word thereDeleting Fields in CRM Deletes Views in Analytics
Hey friends! I'm having some issues when we modify some fields within ZohoCRM. There are times where we need to sunset a field and eventually completely remove it. In these instances, it seems like a lot of views are removed in Analytics. This rangesZoho Desk Android and iOS app update: Access multilingual templates on the IM module
Hello everyone! We have introduced multilingual templates on the IM module of the Zoho Desk mobile app allowing you to send IM template messages in translated versions. iOS: Android: Please update the app to the latest version directly from the App Store/Does Zoho offer a full WhatsApp Marketing Platform (like WATI / GallaBox)?
lm exploring WhatsApp marketing and I’d like to understand what options are available within the Zoho ecosystem. Currently, I see: Zoho SalesIQ has a broadcast option, but it seems very limited — for example, it doesn’t support uploading contacts viaCustom buttons
Getting Error "You can only create 10 custom buttons per module" ! I already have more than 10 for 1 module before trying to create another. Is this a new restriction brought about by the all knowing what's best for businesses Zoho guru ? It would beThe Social Wall: October 2025
Hello everyone, As we head toward the end of the year, we’re bringing you a few updates to help give your social media efforts a strong finish. This month, we’re rolling out new enhancements across both the web and mobile app. Post Preview Have you everClient Script | Update - Support for List Page (Canvas) and Notes
Hello everyone! We are glad to announce two exciting updates in Client Script. Client Script support for List Page (Canvas) Client Script support for Notes These open the door to more dynamic and interactive customizations! 1. Client Script support forPincode Based Pricing
We want to give extra discount to customers within city limits because our shipping and packing costs are less. My proposal is assign list of pincodes to price list and assign the price list to customers whenever they sign up with pincodes. Also showfeature question: lookup field in Projects task layout
Hello, Below we have interface to configure a custom task layout, however, we need a lookup field to let pickup data from other apps, such as Zoho CRM Products module, is that possible or already in your roadmap? or a workaround to achieve it? Thanks in advance.What's New in Zoho Analytics - October 2025
Hello Users! We're are back with a fresh set of updates and enhancements to make data analysis faster and more insightful. Take a quick look at what’s new and see how these updates can power up your reports and dashboards. Explore What's New! ExtremeZoho Analytics & SQL Server - Live connect
Below are the steps I did Created a fresh database and table in my own virtual server Created a new data source connection with live connect I was able to select the tables and created the data source successfully I am getting the error when I try toExplore the Redesigned Quotes Module in Zoho Billing
Dear users, We’re excited to introduce a refreshed look for the Quotes details page in Zoho Billing! This update brings you a more efficient user interface experience without changing your existing workflow. We've enhanced layouts with organized tabs,Latest updates in Zoho Meeting | Create departments, Share PDF files
Hello all, You can now create departments to group team members within your organization. This will make it easier for you to organize department-level meetings and invite members. In webinars, use the Share material feature to share PDF files directlyUnify All Zoho Video Meeting Experiences into One Standardized Platform
Hi Zoho Team, We would like to share an important user experience concern regarding the current state of video meeting functionality across the Zoho ecosystem. The Problem Within Zoho, there are multiple ways to initiate or schedule a video meeting: ZohoImport VAT Kenya
Hi. I am quite lost on how to account for VAT when importing. We are an import and distribution company and when importing we get a customs entry with VAT which we pay and claim for this VAT as we do our monthly sales. My question is how to record this[Free Webinar] Product Updates: Quick Catch-Up Session - Part I - Creator Tech Connect
Hello Everyone! We welcome you all to the upcoming free webinar on the Creator Tech Connect Series. The Creator Tech Connect series is a free monthly webinar featuring deep-dive technical sessions designed for developers, administrators, and app builders.Project expenses in Zoho Books
Just the way timesheet is used to calculate labour cost for a particular project, how do i record other expenses against a project such as materials and consumables used for the project? So that under report, I can view the total amount expended on eachBlueprint status change
I want to change the Blueprint status of a workflow. The status is completed automatically when I added the record through API call. But I want to make it active, I don't see any options for this. Even if I draw transition from any stage , it is not visibleWhat is going on with GMail extension.
Suddenly, it is popping up and saying "Please wait while we work our magic... 10%" and it sits there. Yesterday I waited for an entire hour call and it never got further. Today, it's not resolved. Is there a fix I can do? I've tried all the typicalMarketing Tip #6: Cross-sell with related products
Don’t let customers stop at just one product. Suggesting related or complementary items improves the shopping experience and increases order value. Try this today: Use the Item Recommendations feature in Zoho Commerce and add two to three suggested itemsi cannot use <b></b> to bold the message in Creator C6!!!!???What?
Dear experts and friends, Now Creator 6 blocking us from using <b></b> Anyone facing this issue? I faced it on Creator C6 Previously, it used to work. Now failed to work. Faint~ Seek guidance from everyone on how to bold the message. The super simpleZoho Writer - Option to Export as .zdoc format
I've noticed that it's not possible to export a Zoho Writer Document in the .zdoc format. Isn't zdoc, Zoho Writer's own format? My use case is that I sometimes need to create quite complex documents with floating elements, which sometimes need to become[Announcement] Enhanced Merge APIs of Zoho Writer for automating document generation using Zoho Apps data
Hi users, With the record_id parameter in Zoho Writer's Merge APIs, fields related to the given record id is automatically fetched from the Zoho app. You don't have to spend time manually mapping the records and fields in the Deluge code. Here is a samplePin multiple columns and adjust column widths in CRM subforms
Hello all, Subforms act as secondary forms or tables in which you can associate multiple line items to a primary record and thereby ensure more structured and comprehensive data organization. We've made some recent enhancements to subforms. Here's what's[Webinar] Automate sales and presales workflows with Writer
Sales involves sharing a wide range of documents with customers across the presales, sales, and post-sales stages: NDAs, quotes, invoices, sales orders, and delivery paperwork. Generating and managing these documents manually slows down the overall salesAutomate insurance document workflows with Zoho Writer
Insurance companies have to deal with creating and managing complex documents and forms, such as policy applications, explanation of benefits documents, brochures, renewals, and claim forms. Handling all of this manually is hugely time and effort intensive,Latest updates in Zoho Meeting | New End of session notification to remind everyone about the session end time
Hello everyone, We’re excited to share a new feature for Zoho Meeting ; End of session notification. With this new setting, you can choose to remind all participants or only the host about the scheduled end time of a meeting. You can also choose when[Webinar] Zoho Writer for SCM and logistics
Creating, sharing, and distributing complex documents are constant challenges in the SCM and logistics industry. That's why our next webinar is focused on how to simplify these document workflows. Join us on Jul 10, 2025 for a Zoho Writer webinar designed[Webinar] Zoho Writer for the manufacturing industry
Creating, sharing, and distributing complex documents are constant challenges in the manufacturing services industry. That's why our next webinar is focused on how to simplify these document workflows. Join us on May 8, 2025, for a Zoho Writer webinarAdd 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 submissionsNext Page