Understanding and using Revenue Recognition (Pro and Plus only)

Forecast's Revenue Recognition feature is built to provide an accurate distribution of revenue regardless of budget type, as well as a portfolio-level overview of revenue.

With this feature revenue from T&M or Fixed Price projects can be broken down month over month and also by task, phase, or person. Months can be locked as revenue is reconciled in accounting records. 

While Forecast will always provide suggested amounts for revenue recognition, users with the appropriate permissions can also manually input amounts for revenue recognition if needed. Check out Manual revenue recognition to learn more. 

This article covers:

• Understanding Revenue Recognition
• Accessing the Revenue Recognition page
• Reviewing the Revenue Recognition page
• Managing your Revenue Recognition accounting period

What Is Revenue Recognition?

Revenue recognition is a generally accepted accounting principle (GAAP) that stipulates how and when revenue is to be recognized. The revenue recognition principle, using accrual accounting, requires that revenues are recognized when realized and earned, not when cash is received.

For Time & Materials projects, revenue recognition is relatively straightforward because revenues can simply be recognized according to the date of the time registration or expense they are based on.

With Fixed Price projects and retainers, total revenue being fixed means the value associated with a given piece of time or work is relative to the whole and subject to change. Say total revenue is fixed at $10,000. If the total scope is 10 hours, one hour of work would have $1,000 associated with it. If the total scope expands to 20 hours, that same one hour of work would have only $500 associated with it. For more examples, check out Revenue Recognition for Fixed Price Projects. 

Accessing the Revenue Recognition page

In Forecast you can view and use Revenue Recognition by heading to your project’s Financials page.

To access Revenue Recognition

1. Click Projects in the top bar. 
2. Select All Projects from the dropdown. 
3. Open the project you wish to access.
4. In the left side panel, click Financials. 
5. Select Revenue Recognition.

Reviewing your Revenue Recognition

The Revenue Recognition screen is divided into three tables. For information on the specific categories and calculations, please hover on row text for tooltips.

• Revenue Recognition: Provides an overall summary of the revenue recognized for the project including:
  • Total Revenue Recognition
  • Time
  • Expenses
  • All Costs
  • Estimated profit
  • Estimated profit (%)
• Time revenue recognition: Provides an overview of the time revenue for the project, including:
  • Time manual revenue recognition
  • Suggested time revenue recognition
  • Time cumulative % complete
  • Billable time
  • Variance and adjustment
  • Time costs
• Expenses Revenue recognition: Provides an overview of the expenses for the project, including:
  • Expense revenue recognition
  • Expense cumulative % complete
  • Expense costs

Managing your Revenue Recognition accounting period

In Forecast you have the ability to manage your accounting period for projects with revenue recognized. Locking a month ensures that the revenue for that month will be recognized and it will not spill over into the following months. We suggest as part of your monthly process to lock the revenue. By doing this, the revenue recognition for that month in the Revenue Recognition tab and Details tab will remain fixed at that value and will be grayed out. For Fixed Price projects, future months will recalibrate based on the remaining time budget yet across unlocked months.

To lock the revenue

1. Click Projects in the top bar. 
2. Select All Projects from the dropdown. 
3. Open the project you wish to lock revenue for. 
4. In the left side panel, click Financials. 
5. Select Revenue Recognition.
6. Click on the three-dots icon in the upper right-hand corner of the Revenue Recognition table and select Lock or Unlock revenue OR hover to the left of a month to see a lock icon that you can click on.

Lock revenue recognition on a month if you have reconciled the revenue for that month and wish revenue to remain fixed.

Unlock revenue recognition on a month if you want revenue to be dynamically updated or manually updated.