Cost—not hours—is the most accurate measure of progress. Why you’d choose it:
- Accounts for differences in labor cost across roles
- Reflects true economic consumption of the project
- Includes:
- Billable time
- Non-billable time
- More accurate when:
- Senior vs junior resources have very different costs
- Margin management is important
Before you start
Make sure your project includes:- A Services Revenue Budget
- A Target Services Gross Margin
How the cost budget is calculated
Ruddr derives the services cost budget using: Services Cost Budget = Services Revenue Budget × (1 − Target Services Gross Margin) Example:- Revenue budget: $120,000
- Target margin: 40%
How this method works
Ruddr recognizes revenue based on how much of the total projected cost has been incurred. At a high level:- Track services cost incurred to date
- Estimate total project cost
- Calculate percent complete
- Recognize revenue based on that percentage
How Ruddr calculates revenue
For each recognition period, Ruddr:- Calculates total services cost incurred to date
- Determines total projected services cost as the greater of:
- Budgeted cost
- Actual cost + future allocated cost (if using allocations)
- Calculates percent complete
- Calculates total revenue earned to date
- Subtracts previously recognized revenue to determine the current period entry
What’s included in services cost
Services cost includes all project hours, not just billable time:- Billable hours
- Non-billable hours
Key formulas (reference)
Percent completeTotal services cost incurred ÷ Total projected services cost Total projected cost
The greater of Budgeted cost and (Actual cost + future allocated cost) Revenue earned to date
Percent complete × Services revenue budget Revenue for current period
Revenue earned to date − Previously recognized revenue
How automation works
If automated revenue recognition is enabled:- Runs weekly or monthly
- Monthly runs create entries for the previous month
- Weekly runs create entries for the prior week
- If using allocations:
- Future forecasted entries are created
- Forecasts are refreshed each run
Example 1: Project stays within services cost budget
This example shows standard behavior when projected cost does not change. Project setup:- Services Revenue Budget: $120,000
- Target Services Gross Margin: 40%
- Services Cost Budget: $72,000
- Monthly automation enabled
Month 1
- Cost to date: $14,400
- Percent complete: 20%
- Revenue earned to date: $24,000
- Revenue recognized: $24,000
Month 2
- Cost to date: $36,000
- Percent complete: 50%
- Revenue earned to date: $60,000
- Previously recognized: $24,000
- Revenue recognized: $36,000
Month 3
- Cost to date: $54,000
- Percent complete: 75%
- Revenue earned to date: $90,000
- Previously recognized: $60,000
- Revenue recognized: $30,000
Month 4
- Cost to date: $72,000
- Percent complete: 100%
- Revenue earned to date: $120,000
- Previously recognized: $90,000
- Revenue recognized: $30,000
Summary table:
| Month | Services Cost to Date | Projected Total Services Cost | % Complete | Revenue Recognized Through Period | Current Month Rev Rec |
|---|---|---|---|---|---|
| 1 | $14,400.00 | $72,000.00 | 20.00% | $24,000.00 | $24,000.00 |
| 2 | $36,000.00 | $72,000.00 | 50.00% | $60,000.00 | $36,000.00 |
| 3 | $54,000.00 | $72,000.00 | 75.00% | $90,000.00 | $30,000.00 |
| 4 | $72,000.00 | $72,000.00 | 100.00% | $120,000.00 | $30,000.00 |
Summary
- Revenue follows progress based on cost incurred
- Each period recognizes the incremental earned amount
- Total revenue = $120,000
Example 2: Project exceeds cost budget
This example shows what happens when projected cost increases during the project. Project setup:- Services Revenue Budget: $120,000
- Original Services Cost Budget: $72,000
- Monthly automation enabled
- Project uses allocations
What changes?
In Month 3, projected cost increases because:- Actual cost + future allocated cost exceeds the original budget
max(Budgeted cost, Actual cost + future allocated cost)
Month 1
- Cost to date: $14,400
- Projected cost: $72,000
- Percent complete: 20%
- Revenue earned to date: $24,000
- Revenue recognized: $24,000
Month 2
- Cost to date: $36,000
- Projected cost: $72,000
- Percent complete: 50%
- Revenue earned to date: $60,000
- Previously recognized: $24,000
- Revenue recognized: $36,000
Month 3 (projected cost increases)
- Cost to date: $54,000
- Projected cost: $84,000
- Percent complete: 64.29%
- Revenue earned to date: $77,142.86
- Previously recognized: $60,000
- Revenue recognized: $17,142.86
Month 4
- Cost to date: $84,000
- Projected cost: $84,000
- Percent complete: 100%
- Revenue earned to date: $120,000
- Previously recognized: $77,142.86
- Revenue recognized: $42,857.14
Summary table: projected cost exceeds budget in Month 3
| Month | Services Cost to Date | Future Services Cost | Projected Total Services Cost | % Complete | Revenue Recognized Through Period | Current Month Rev Rec |
|---|---|---|---|---|---|---|
| 1 | $14,400.00 | $57,600.00 | $72,000.00 | 20.00% | $24,000.00 | $24,000.00 |
| 2 | $36,000.00 | $36,000.00 | $72,000.00 | 50.00% | $60,000.00 | $36,000.00 |
| 3 | $54,000.00 | $30,000.00 | $84,000.00 | 64.29% | $77,142.86 | $17,142.86 |
| 4 | $84,000.00 | $0.00 | $84,000.00 | 100.00% | $120,000.00 | $42,857.14 |
Why revenue decreases in Month 3
If projected cost had stayed at $72,000:- Percent complete = $54,000 ÷ $72,000 = 75%
- Revenue earned to date = $90,000
- Percent complete = $54,000 ÷ $84,000 = 64.29%
- Revenue earned to date = $77,142.86
Key takeaway
When projected cost increases:- Percent complete decreases
- Revenue is spread across more total cost
- Current period revenue may be lower than expected
Important: projects with allocations
If your project uses resource allocations:- Projected cost can increase during the project
- This happens when:
- Actual cost + future allocations exceed the original budget
- Revenue recognition adjusts automatically
- Earlier expectations may shift based on the new projection