Revenue Recognition

Guide to recognizing revenue for projects in NetSuite.

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Overview

REVENUE RECOGNITION METHODS
═══════════════════════════════════════════════════════════════════

                    When Revenue is Recognized
                    ─────────────────────────────

COMPLETED CONTRACT
├── Revenue recognized at project completion
└── All costs deferred until complete

PERCENT COMPLETE
├── Revenue recognized as work progresses
└── Based on hours or cost ratio

MILESTONE
├── Revenue recognized at milestone completion
└── Tied to billing schedule

TIME & MATERIALS
├── Revenue recognized when billed
└── Matches billing to revenue

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Percent Complete Method

Calculation Basis

PERCENT COMPLETE FORMULA
───────────────────────────────────────────────────────────

Method 1: Hours-Based (Default)
  % Complete = Actual Hours / Budgeted Hours × 100

  Example:
    Budgeted Hours: 400
    Actual Hours:   280
    % Complete:     70%

Method 2: Cost-Based
  % Complete = Actual Costs / Estimated Total Costs × 100

  Example:
    Estimated Total: $100,000
    Actual to Date:  $65,000
    % Complete:      65%

Revenue Recognition Calculation

REVENUE RECOGNITION EXAMPLE
───────────────────────────────────────────────────────────

Project Value: $200,000
Current % Complete: 60%
Previously Recognized: 40% ($80,000)

Current Period Recognition:
  Total Earned: 60% × $200,000 = $120,000
  Less: Already Recognized     = $80,000
  ─────────────────────────────────────────
  Current Period Recognition   = $40,000

Journal Entry:
  Debit:  Unbilled Receivable    $40,000
  Credit: Deferred Revenue       $40,000

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Percent Complete Override

Manual Override

PERCENT COMPLETE OVERRIDE
───────────────────────────────────────────────────────────

Navigation: Project Record > Percent Complete Override Subtab

Use Cases:
  • External PM determines % complete
  • Different calculation method needed
  • Customer-agreed progress differs from hours

Override Entry:
┌────────────────────────────────────────────────────────┐
│ Period          Calculated %     Override %           │
│ ──────          ────────────     ──────────           │
│ January 2026    35%              40%                  │
│ February 2026   50%              55%                  │
│ March 2026      70%              75%                  │
└────────────────────────────────────────────────────────┘

Override supersedes calculated percentage

CSV Import

IMPORT PERCENT COMPLETE
───────────────────────────────────────────────────────────

For bulk updates from external PM system:

CSV Format:
  Project ID, Period, Percent Complete
  PRJ-00125, Jan 2026, 40
  PRJ-00125, Feb 2026, 55
  PRJ-00130, Jan 2026, 25

Import via:
  Setup > Import/Export > Import CSV Records

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Milestone-Based Recognition

Setup

MILESTONE REVENUE RECOGNITION
───────────────────────────────────────────────────────────

Billing Schedule Setup:
┌────────────────────────────────────────────────────────┐
│ Milestone               Amount     Rev Rec Trigger    │
│ ─────────               ──────     ───────────────    │
│ Kickoff Complete        $20,000    Milestone Complete │
│ Design Approved         $30,000    Milestone Complete │
│ Development Done        $35,000    Milestone Complete │
│ Go-Live                 $15,000    Milestone Complete │
│ ──────────────────────────────────────────────────────│
│ Total Contract          $100,000                      │
└────────────────────────────────────────────────────────┘

When milestone marked complete:
  → Revenue recognized for that milestone

Linking Milestones to Tasks

MILESTONE-TASK LINK
───────────────────────────────────────────────────────────

Milestone: Design Approved ($30,000)
Linked to: Task 2.3 - Design Sign-off

Automation:
  Task 2.3 marked Complete
      ↓
  Milestone marked Complete
      ↓
  Revenue recognized ($30,000)
      ↓
  Charge created for billing

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Revenue Recognition Rules

Creating Rev Rec Rule

REVENUE RECOGNITION RULE
───────────────────────────────────────────────────────────

Navigation: Lists > Accounting > Revenue Recognition Rules

Rule Configuration:
┌────────────────────────────────────────────────────────────────┐
│ Rule Name:           Fixed Price Project Rev Rec              │
│ Recognition Method:  Over Time                                │
│                                                                │
│ Amount Source:       Event Percent Complete                   │
│                                                                │
│ Rev Rec Account:     Deferred Revenue                        │
│ Recognize To:        Service Revenue                         │
│                                                                │
│ Event Percent Source: Project Percent Complete               │
└────────────────────────────────────────────────────────────────┘

Assigning to Items

ASSIGN RULE TO SERVICE ITEM
───────────────────────────────────────────────────────────

Service Item: Consulting Services

Revenue Recognition:
┌────────────────────────────────────────────────────────┐
│ Revenue Recognition Rule:                             │
│   Fixed Price Project Rev Rec                         │
│                                                        │
│ OR                                                    │
│                                                        │
│ Recognition Template:                                 │
│   3-Month Straight Line                               │
└────────────────────────────────────────────────────────┘

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Advanced Revenue Management (ARM)

ARM Integration

ADVANCED REVENUE MANAGEMENT
───────────────────────────────────────────────────────────

Enable ARM for:
  • ASC 606 / IFRS 15 compliance
  • Multi-element arrangements
  • Variable consideration
  • Contract modifications

Project Integration:
  ARM uses project % complete as recognition event
  Automates complex recognition scenarios

ARM Project Setup

ARM WITH PROJECTS
───────────────────────────────────────────────────────────

Contract creates Revenue Elements:
┌────────────────────────────────────────────────────────┐
│ Element          Amount     Recognition Basis         │
│ ───────          ──────     ─────────────────         │
│ Consulting       $80,000    Percent Complete          │
│ Implementation   $40,000    Milestones                │
│ Support (Y1)     $20,000    Straight Line (12 mo)     │
└────────────────────────────────────────────────────────┘

Each element can have different recognition method

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Revenue Forecast

Forecasting

REVENUE FORECAST
───────────────────────────────────────────────────────────

Project: PRJ-00125
Current % Complete: 60%

Forecast (remaining project):
┌────────────────────────────────────────────────────────┐
│ Period          Expected %     Revenue                │
│ ──────          ──────────     ───────                │
│ January         60% → 70%      $20,000                │
│ February        70% → 85%      $30,000                │
│ March           85% → 100%     $30,000                │
│ ──────────────────────────────────────────────────────│
│ Remaining                      $80,000                │
└────────────────────────────────────────────────────────┘

Total Contract: $200,000
Recognized YTD: $120,000

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Deferred Revenue

Deferred Revenue Tracking

DEFERRED REVENUE
───────────────────────────────────────────────────────────

Scenario:
  Customer pays $100,000 upfront
  Project is 40% complete

Accounting:
  Cash Received:               $100,000
  Revenue Recognized (40%):    $40,000
  Deferred Revenue:            $60,000

Balance Sheet:
  Deferred Revenue (Liability): $60,000
  (Released as work progresses)

Deferred Revenue Report

DEFERRED REVENUE BY PROJECT
───────────────────────────────────────────────────────────

As of January 31, 2026:

┌────────────────────────────────────────────────────────┐
│ Project      Billed      Recognized    Deferred       │
│ ───────      ──────      ──────────    ────────       │
│ PRJ-00125    $100,000    $40,000       $60,000        │
│ PRJ-00130    $50,000     $35,000       $15,000        │
│ PRJ-00131    $75,000     $60,000       $15,000        │
│ ──────────────────────────────────────────────────────│
│ Total        $225,000    $135,000      $90,000        │
└────────────────────────────────────────────────────────┘

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Revenue Recognition Schedule

Viewing Schedule

REV REC SCHEDULE
───────────────────────────────────────────────────────────

Project: PRJ-00125
Contract Value: $200,000

┌────────────────────────────────────────────────────────────────┐
│ Period          % Complete    Amount      Status               │
│ ──────          ──────────    ──────      ──────               │
│ October         10%           $20,000     Recognized          │
│ November        25%           $30,000     Recognized          │
│ December        40%           $30,000     Recognized          │
│ January         60%           $40,000     Pending             │
│ February        80%           $40,000     Forecast            │
│ March           100%          $40,000     Forecast            │
│ ──────────────────────────────────────────────────────────────│
│ Total                         $200,000                        │
└────────────────────────────────────────────────────────────────┘

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Best Practices

Revenue Recognition

Practice	Recommendation
Method selection	Match to billing type
Consistent	Apply same method to similar projects
Document	Document method choice
Review monthly	Validate % complete
Override carefully	Justify manual overrides

Common Issues

Issue	Cause	Resolution
No rev rec	Rule not assigned	Assign to item
Wrong amount	% incomplete	Update time entries
Override ignored	Period mismatch	Check period settings
Deferred stuck	Project not progressing	Update % complete

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Related Topics

• Project Billing - Invoice generation
• Project Costing - Cost matching
• Project Reporting - Rev rec reports