The Percentage of Time & Materials (T&M) Revenue method recognizes revenue on a fixed fee project based on the value of work delivered, using T&M rates.
It measures progress based on revenue generated at bill rates, rather than hours or cost.
👉 Use this method when billable value is the best indicator of progress, especially when team members have significantly different bill rates. You may also choose to use this when member costs are not available in Ruddr.
Best when:
The value of work delivered (at bill rates) is the best measure of progress.
Why you’d choose it:
- Accounts for differences in bill rates across roles
- Aligns progress with customer-facing value, not just effort or cost
- Useful when:
- Pricing varies significantly by role
- You want progress tied to revenue-generating value
- Often closest to how work would be valued in a T&M model
- Is a good option when member costs are not available
In this method, higher-value work contributes more to progress
Before you start
Make sure your project includes:
- A Services Revenue Budget
- Bill rates defined for each project member or role
- A detailed budget with billable hours for each role or member
Even though bill rates do not affect invoicing on a fixed fee project, they do affect revenue recognition for this method.
How the T&M value is calculated
Ruddr calculates the project’s budgeted T&M revenue using:
- Budgeted billable hours × bill rate (for each role or team member)
Then sums those values across the project.
How this method works
Ruddr recognizes revenue based on how much T&M value has been delivered relative to the total projected T&M value.
At a high level:
- Track T&M revenue generated to date
- Estimate total projected T&M revenue
- Calculate percent complete
- Recognize revenue based on that percentage
How Ruddr calculates revenue
For each recognition period, Ruddr:
- Calculates T&M revenue to date
- Determines total projected T&M revenue as the greater of:
- Budgeted T&M revenue
- Past T&M revenue + future forecasted T&M revenue (if using allocations)
- Calculates percent complete
- Calculates total revenue earned to date
- Subtracts previously recognized revenue to determine the current period entry
Key formulas (reference)
Budgeted T&M revenue
Sum of (Budgeted hours × bill rate) for each role or member
Percent complete
T&M revenue to date ÷ Total projected T&M revenue
Total projected T&M revenue
The great of Budgeted T&M revenue and (Past T&M revenue + future forecasted T&M revenue)
Revenue earned to date
Percent complete × Fixed fee 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 progresses as expected
This example shows standard behavior when projected T&M revenue does not change.
Project setup:
- Fixed Fee Services Revenue Budget: $120,000
- Budgeted T&M Revenue: $160,000
- Monthly automation enabled
Month 1
- T&M revenue to date: $32,000
- Percent complete: 20%
- Revenue earned to date: $24,000
- Revenue recognized: $24,000
Month 2
- T&M revenue to date: $80,000
- Percent complete: 50%
- Revenue earned to date: $60,000
- Previously recognized: $24,000
- Revenue recognized: $36,000
Month 3
- T&M revenue to date: $120,000
- Percent complete: 75%
- Revenue earned to date: $90,000
- Previously recognized: $60,000
- Revenue recognized: $30,000
Month 4
- T&M revenue to date: $160,000
- Percent complete: 100%
- Revenue earned to date: $120,000
- Previously recognized: $90,000
- Revenue recognized: $30,000
Summary table:
| Month | T&M Revenue to Date | Projected Total T&M Revenue | % Complete | Revenue Recognized Through Period | Current Month Rev Rec |
|---|---|---|---|---|---|
| 1 | $32,000.00 | $160,000.00 | 20.00% | $24,000.00 | $24,000.00 |
| 2 | $80,000.00 | $160,000.00 | 50.00% | $60,000.00 | $36,000.00 |
| 3 | $120,000.00 | $160,000.00 | 75.00% | $90,000.00 | $30,000.00 |
| 4 | $160,000.00 | $160,000.00 | 100.00% | $120,000.00 | $30,000.00 |
Summary
- Revenue follows progress based on delivered value
- Each period recognizes the incremental earned amount
- Total revenue = $120,000
Example 2: Total forecasted T&M revenue increases
This example shows what happens when projected T&M revenue increases during the project.
Project setup:
- Fixed Fee Services Revenue Budget: $120,000
- Original Budgeted T&M Revenue: $160,000
- Monthly automation enabled
- Project uses allocations
What changes?
In Month 3, projected T&M revenue increases because:
- Past T&M revenue + future forecasted T&M revenue exceeds the original budget
Ruddr recalculates projected revenue using:
max(Budgeted T&M revenue, Past + future forecasted T&M revenue)
Month 1
- T&M revenue to date: $32,000
- Projected revenue: $160,000
- Percent complete: 20%
- Revenue earned to date: $24,000
- Revenue recognized: $24,000
Month 2
- T&M revenue to date: $80,000
- Projected revenue: $160,000
- Percent complete: 50%
- Revenue earned to date: $60,000
- Previously recognized: $24,000
- Revenue recognized: $36,000
Month 3 (projected revenue increases)
- T&M revenue to date: $120,000
- Projected revenue: $180,000
- Percent complete: 66.67%
- Revenue earned to date: $80,000
- Previously recognized: $60,000
- Revenue recognized: $20,000
Month 4
- T&M revenue to date: $180,000
- Projected revenue: $180,000
- Percent complete: 100%
- Revenue earned to date: $120,000
- Previously recognized: $80,000
- Revenue recognized: $40,000
Summary table: projected T&M revenue exceeds budget in Month 3
| Month | T&M Revenue to Date | Future Forecasted T&M Revenue | Projected Total T&M Revenue | % Complete | Revenue Recognized Through Period | Current Month Rev Rec |
|---|---|---|---|---|---|---|
| 1 | $32,000.00 | $128,000.00 | $160,000.00 | 20.00% | $24,000.00 | $24,000.00 |
| 2 | $80,000.00 | $80,000.00 | $160,000.00 | 50.00% | $60,000.00 | $36,000.00 |
| 3 | $120,000.00 | $60,000.00 | $180,000.00 | 66.67% | $80,000.00 | $20,000.00 |
| 4 | $180,000.00 | $0.00 | $180,000.00 | 100.00% | $120,000.00 | $40,000.00 |
Why revenue decreases in Month 3
If projected revenue had stayed at $160,000:
- Percent complete = $120,000 ÷ $160,000 = 75%
- Revenue earned to date = $90,000
But because projected revenue increased to $180,000:
- Percent complete = $120,000 ÷ $180,000 = 66.67%
- Revenue earned to date = $80,000
👉 This results in less revenue recognized in Month 3
Key takeaway
When projected T&M revenue increases:
- Percent complete decreases
- Revenue is spread across a larger total value
- Current period revenue may be lower than expected
Important: projects with allocations
If your project uses resource allocations:
- Projected T&M revenue can increase during the project
- This happens when:
- Future work has higher value than originally planned
When this occurs:
- Revenue recognition adjusts automatically
- Earlier expectations may shift based on the new projection