Skip to the main content.

Time tracking
Build your perfect data foundation for spotless invoicing and deep business insights with easy time tracking.

Project management
Be a world champion project manager. Keep your projects on track - and profitable.

Resource management
Efficiently staff projects and run a predictable business with confidence.

Insights & Reporting
Get smarter - faster - to make clever decisions for long-term growth impact.

Project accounting & Invoicing
Invoice everything - fast and accurate - while staying on top of project finances.

Staff & Salary
Give accountants and HR an intelligent tool to eliminate draining administration.

Financial Systems
TimeLog offers standard integrations for all your favourite financial systems. Save time and reduce manual tasks.

Payroll Solutions
TimeLog offers standard integrations for multiple payroll solutions. Get easy salary administration and only enter payroll information once.

Add-ons
Track time automatically via Outlook, use gamification or find another add-on that can support your business.

Multiple Legal Entities
You can create synergy between your departments and across borders and offices with the Multiple Legal Entities module from TimeLog. 

Business Intelligence
Utilise the insights you get from TimeLog to the fullest. Our system is ready to integrate with multiple BI solutions.

Partner Integrations
TimeLog PSA is part of a large ecosystem. Get an overview of all the partner integrations in the TimeLog family.

Economy department
Save 1-2 days a month on your invoicing process.

Project teams
From planning to execution and evaluation. Robust tools for every project manager.

Management teams
Create a performance-driven culture with solid reporting capabilities.

Large enterprises
Enhance operations and performance across entities, countries and departments.

NGOs and non-profit organisations
Simplify internal processes, spend less time on administration, and get documentation in place - at a discounted rate.

Blog
Get inspired to run an even better business with articles, guides and analyses.

Guides, podcasts and webinars
Get access to templates, guides and webinars that help and inspire you.

Help Center
Looking for help material and user guides to the TimeLog system? Look no further. Find all the help you need now.

Resource - EU Working Time Directive - Header

Try 30 days free

Get a single source of truth
Discover how companies maintain a single source of truth across borders, departments, and currencies.

Get integrated
Discover the advantages customers gain from utilising our integrations and API. 

Reporting in real-time
Explore how others leverage reporting to optimise their processes and make informed decisions.

Get started with resource planning
Discover how other companies thoroughly grasp their resources and enhance their ability to predict future trends.

Improved project financials
This is how the efficient financial toolbox from TimeLog helps project managers and CFOs improve their project financials.

Faster invoicing
Discover how other companies have slashed the time spent on invoicing by 75% - and uncover how you can achieve the same efficiency.

The Story of TimeLog
Get insights on TimeLog and how we can help you grow and evolve your business.

Employees
See who shows up every day to deliver the best PSA solution.

Career
What's life like at TimeLog? Are we hiring? Get the answer here.

Partner
Create even more value for your customers, as well as ours, as a TimeLog Partner.

Premium Service
Online Help Center, tailored onboarding and support from Day 1.

Corporate Social Responsibility
We work to ensure a positive impact on planet, people and businesses.

Security and GDPR
Learn more about how we work to keep your data safe and provide maximum security.

4 min read

Advanced project accounting: Revenue recognition and work-in-progress

As a project manager, many of your tasks and responsibilities revolve around managing risk: Delivery risk, the risk of budget overruns, and delays.

Revenue recognition and work-in-progress (WIP) are some of the most potent tools in your toolbox to reduce risk, monitor income in real-time, and explore project profitability. 

And guess what? Those are the processes we focus on in this blog.

Advanced project accounting: Revenue recognition and work-in-progress

With over two decades of experience working with professional service organisations, our 4-level project management maturity model focuses on specific processes and key performance indicators (KPIs) to help you efficiently manage all projects and improve your project accounting game.

Today, we dive into the advanced level of project financial management:

The guardian level: Reducing the risk

Financial Project Management Maturity Model - Guardian Level

 

The goal for the guardian level: Monitor project profitability 

You can accurately monitor income, costs, and profitability by implementing processes for revenue recognition and work-in-progress and become a pro at project accounting.

Let's dive in!

1. Revenue recognition

Revenue recognition is essential to measure the financial results of your projects correctly.

The goal is to record income when it is actually earned, ensuring financial reports accurately reflect the company's true performance. This helps provide stakeholders with a clear and reliable picture of the company's financial health.

What is revenue recognition? 

Revenue recognition is the systematic recording of income generated by project activities, based on project milestones or specific accounting criteria."

The process of revenue recognition

The process of revenue recognition is crucial for accurately measuring the financial performance of projects. It involves thoroughly assessing how much revenue the project has generated based on the total contract amount agreed upon with the client.

To kickstart this process, the project manager needs to review the work completed so far, considering the contributions of various team members. Examining the already recorded revenue can establish a baseline for revenue recognition for the current month.

Implementing a robust revenue-securing process ensures that the project team can confidently identify and acknowledge their revenue. This leads to improved accuracy in financial reporting and provides valuable insights into the actual value of the work being done.

hand-point-right-light

Click to see key points in revenue recognition

Key points of revenue recognition:

Accrual Basis: Revenue is recognised when earned, not necessarily when cash is received.

Methods:

  • Budget completion percentage: Revenue is recognised based on the project's progress.
  • Completed contract: Revenue is recognised only when the project is fully completed.

Performance obligations: Revenue is recognised when specific project deliverables or milestones are achieved.

Contract terms: Understanding the project's contract to determine revenue recognition, including payment schedules and milestones.

Cost management: Accurate tracking of project costs to determine revenue recognition.

Accounting standards: Compliance with standards like IFRS 15 or ASC 606.

2. Work-in-progress

Once you’ve established the foundation of quality, real-time data and budgeting, you can start optimising your work-in-progress (WIP).

This means you track and manage unfinished tasks that are in progress but not yet completed.

This process involves monitoring the status of ongoing work, assessing completion percentage, and capturing the associated costs and revenues.

Handling WIP aims to accurately value and report the costs and progress of ongoing projects. This ensures that financial statements reflect the current status of projects, providing a clear and reliable picture of the company's financial position and project performance.

hand-point-right-light

Click to see how you handle WIP in TimeLog PSA

How to handle work-in-progress in TimeLog PSA

1. Set up projects and tasks

  • Create projects: Start by creating a new project in TimeLog PSA.
  • Define tasks: Break down the project into tasks and milestones. Assign clear objectives and deliverables for each task. Add project members to your project.

2. Start tracking time

  • Start tracking time: Log time on each task. Include comments, start and end times, and additional notes.

3. Review and approve time entries

  • Review work hours: Establish the process of reviewing and approving time entries regularly.

3. Monitor work-in-progress

  • WIP reports: Generate WIP reports to monitor the hours logged, the percentage of completion, and the costs incurred.
  • Analyse data: Use the reports to analyse the data and compare actual hours worked against the estimated hours.

4. Billing and Invoicing

  • Draft invoices: Create draft invoices based on the approved time entries and WIP reports; in TimeLog PSA, this is done with only a few clicks with our One Click Invoicing (OCI) process
  • Adjustments: Make necessary adjustments before finalising the invoices to reflect the completed work accurately. The project manager can set up and draft invoices and the bookkeeper can send and finalise them.

5. Communicate with stakeholders

  • Regular updates: Share progress updates and WIP reports with stakeholders to inform them about the project status.
  • Feedback loop: Implement a feedback loop to address any concerns or adjustments needed based on the progress reported.

Also read: Stakeholder analysis for project managers

Essential project accounting KPIs to monitor income and project profitability 

Financial_project_management_KPIs_guardian

Earned value (EV)

Now that you have precise revenue recognition, you can report how much revenue you’re earning in real-time.

Formula for earned value:

Earned value (EV) = % of Planned Completion x Total Project Budget

For example, if the actual percentage complete is 25% and the task budget is $10,000, EV = 25% x $10,000 = $2,500.

As a project manager, the earned value (EV) KPI lets you assess cost performance and helps identify if the project is on track financially and budget-wise. The KPI is also known as the ‘Budgeted cost of work performed (BCWP)’.

You can also use the KPI to forecast project outcomes.

Also read: Project management in Excel - is it enough?

Early write-downs

When you have a structure for the revenue recognition process, you can proactively identify, address, and mitigate adverse impacts on a project outcome. And this is precisely what the KPI ‘early write-downs‘ is about.

There isn’t a specific formula for early write-downs. It includes these components:

  • Write-down amount: The monetary value of the write-down.
  • Original value: The initial value of the asset/investment before the write-down.
  • Time: The period over which the write-down occurs.

Actions can include booking less revenue than initially expected. Even though earning less revenue is risky for the financial outcome and profit, early write-downs help you avoid being blindsided and having to write down at the end of the project because the budget was inaccurate and you didn't track or review the numbers regularly.

Note: It is best practice to keep your bookings as true as possible. Rather than changing your contract or hourly rate, accept the write-down instead. That way, you retain traceability and the project history, and you can learn from the project's progression when doing quotes in the future.

You can easily see what has been estimated, recognized as income, and written down in TimeLog PSA for your project.

Also read: Introduction to Project Financial Management

Current hourly rate

The current hourly rate shows how much you spend on labour in real time, helping you effectively manage and reduce project costs.

It differs from the average hourly rate by focusing on the present moment and is specific to a particular period. In contrast, the average hourly rate provides an overall perspective over a more extended time.

Formula for the current hourly rate:

Current hourly rate =  Total project costs / Total project hours

Also read: The project triangle: How to balance time, budget and scope 


Every offer is based on reliable time estimates, and we’re constantly improving our estimation skills based on our experience with TimeLog. The project factor is our guiding light, and we’re continually mindful of not ‘getting too red'."
Seismonaut case
Anna Porse Nielsen
CEO, Seismonaut A/S

Looking to boost your project's bottom line and improve project accounting?

Unlock your project's full potential with TimeLog's state-of-the-art Professional Services Automation solution, designed to streamline project accounting and project management. Gain insight into consultant performance, project profitability, and client success effortlessly.

See how TimeLog can elevate your project's success and profitability! Schedule a quick 20-minute consultation with us today.

New to project financials? Learn which processes and KPIs to master

New to project financials? Learn which processes and KPIs to master

12 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now
Ready to take your project profitability to the next level?

Ready to take your project profitability to the next level?

10 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now
What is project financial management?

What is project financial management?

9 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now
How to handle project finance like a pro

How to handle project finance like a pro

10 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now
Project management in Excel – is it enough?

Project management in Excel – is it enough?

7 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now
5 of the biggest project management mistakes

5 of the biggest project management mistakes

5 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now
Project Management 101: Understanding the Project Lifecycle

Project Management 101: Understanding the Project Lifecycle

6 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now
The project triangle: How to balance project time, budget and scope

The project triangle: How to balance project time, budget and scope

9 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now
Agile project management: The project manager's guide to success

Agile project management: The project manager's guide to success

6 min read

Discover advanced project accounting techniques to reduce risk and improve project profitability: We zoom in on revenue recognition and work-in-progress.

Download now