The Percentage of Billable Hours method recognizes revenue on a fixed fee project based on how much work has been completed.
It uses billable hours delivered as a measure of progress.
👉 Use this method when billable hours are a reliable indicator of project completion.
Best when:
All billable hours are roughly equal in value and cost.
Why you’d choose it:
- It’s the simplest and most intuitive method
- Progress is directly tied to effort (hours worked)
- Works well when:
- Team members have similar bill rates
- Cost differences between roles are minimal
- Easy to explain and predict
In this method, every billable hour contributes equally to progress
Before you start
Make sure your project includes:
- A Services Revenue Budget
- A Billable Hours Budget
Both can be configured at the summary or detailed level.
How this method works
Ruddr recognizes revenue based on how much of the total projected work has been completed.
At a high level:
- Track billable hours worked to date
- Estimate total project hours
- Calculate percent complete
- Recognize revenue based on that percentage
How Ruddr calculates recognizable revenue
For each recognition period, Ruddr:
- Calculates total billable hours worked to date
- Determines total projected billable hours as the greater of:
- Budgeted hours
- Actual hours + future allocated hours (if using allocations)
- Calculates percent complete
- Calculates total revenue earned to date
- Subtracts previously recognized revenue to determine the current period entry
Important: projects with allocations
If your project uses resource allocations:
- Projected hours can increase during the project
- This happens when:
- Actual hours + future allocations exceed the original budget
When this occurs:
- Revenue recognition adjusts automatically
- Earlier expectations may shift based on the new projection
Key formulas (reference)
Percent complete
Total billable hours worked ÷ Total projected billable hours
Total projected hours
The great of Budgeted billable hours and (Actual billable hours + future allocated billable hours)
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 budget
This example shows the standard behavior when projected hours do not change.
Project setup:
- Services Revenue Budget: $120,000
- Billable Hours Budget: 1,200 hours
- Monthly automation enabled
- Project stays within budget
Month 1
- Hours to date: 240
- Percent complete: 20%
- Revenue earned to date: $24,000
- Revenue recognized: $24,000
Month 2
- Hours to date: 600
- Percent complete: 50%
- Revenue earned to date: $60,000
- Previously recognized: $24,000
- Revenue recognized: $36,000
Month 3
- Hours to date: 900
- Percent complete: 75%
- Revenue earned to date: $90,000
- Previously recognized: $60,000
- Revenue recognized: $30,000
Month 4
- Hours to date: 1,200
- Percent complete: 100%
- Revenue earned to date: $120,000
- Previously recognized: $90,000
- Revenue recognized: $30,000
Summary table
| Month | Billable Hours to Date | % Complete | Revenue Recognized Through Period | Current Month Rev Rec |
|---|---|---|---|---|
| 1 | 240 | 20% | $24,000 | $24,000 |
| 2 | 600 | 50% | $60,000 | $36,000 |
| 3 | 900 | 75% | $90,000 | $30,000 |
| 4 | 1,200 | 100% | $120,000 | $30,000 |
Summary
- Revenue follows linear progress
- Each period recognizes the incremental earned amount
- Total revenue = $120,000
Example 2: Total forecasted billable hours exceed budgeted billable hours
This example shows what happens when projected hours increase during the project.
Project setup:
- Services Revenue Budget: $120,000
- Original Billable Hours Budget: 1,200 hours
- Monthly automation enabled
- Project uses resource allocations
What changes?
In Month 3, projected hours increase because:
- Actual hours + future allocated hours exceed the original budget
Ruddr recalculates total projected hours using:
max(Budgeted hours, Actual hours + future allocated hours)
Month 1
- Hours to date: 240
- Projected hours: 1,200
- Percent complete: 20%
- Revenue earned to date: $24,000
- Revenue recognized: $24,000
Month 2
- Hours to date: 600
- Projected hours: 1,200
- Percent complete: 50%
- Revenue earned to date: $60,000
- Previously recognized: $24,000
- Revenue recognized: $36,000
Month 3 (projected hours increase)
- Hours to date: 900
- Projected hours: 1,400
- Percent complete: 64.29%
- Revenue earned to date: $77,142.86
- Previously recognized: $60,000
- Revenue recognized: $17,142.86
Month 4
- Hours to date: 1,400
- Projected hours: 1,400
- Percent complete: 100%
- Revenue earned to date: $120,000
- Previously recognized: $77,142.86
- Revenue recognized: $42,857.14
Summary table
| Month | Actual Hours to Date | Future Allocated Hours | Projected Total Hours | % Complete | Revenue Recognized Through Period | Current Month Rev Rec |
|---|---|---|---|---|---|---|
| 1 | 240 | 960 | 1,200 | 20.00% | $24,000.00 | $24,000.00 |
| 2 | 600 | 600 | 1,200 | 50.00% | $60,000.00 | $36,000.00 |
| 3 | 900 | 500 | 1,400 | 64.29% | $77,142.86 | $17,142.86 |
| 4 | 1,400 | 0 | 1,400 | 100.00% | $120,000.00 | $42,857.14 |
Why revenue decreases in Month 3
If projected hours had stayed at 1,200:
- Percent complete would be: 900 / 1,200 = 75%
- Revenue earned to date would be: $90,000
But because projected hours increased to 1,400:
- Percent complete becomes: 900 / 1,400 = 64.29%
- Revenue earned to date becomes: $77,142.86
👉 This results in less revenue recognized in Month 3
Key takeaway
When projected hours increase:
- Percent complete decreases
- Revenue is spread across more total hours
- Current period revenue may be lower than expected