Percentage of Completion Method
What is the percentage of completion method?
The percentage of completion method recognizes revenue on a long project in proportion to how much of the work has been completed during each period. Instead of waiting until the end, revenue follows progress.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that tracks progress and costs against each contract, so revenue is recognized on a consistent, documented basis.
How it works
- Estimate total contract revenue and total expected cost
- Measure progress, for example costs incurred compared with total estimated costs
- Recognize the matching share of revenue each period, and update estimates as they change
The figures below are illustrative. A $100,000 contract is 40 percent complete at the end of the quarter, so $40,000 of revenue is recognized in that period.
Why it matters for service firms
This method suits longer projects where waiting until delivery would distort monthly results. It depends on reliable estimates, so firms should review progress and costs regularly.
Frequently asked questions
Is the percentage of completion method always allowed?
Whether it applies depends on your accounting standards and contract terms. Some contracts call for recognizing revenue at a point in time instead, so confirm the right approach with your accountant.
How are changes in estimates handled?
Update the estimate when new information appears and record the effect in the period of the change. Document the reasons so reviewers can follow the logic.
Related terms and guides: revenue recognition, work in progress, progress billing, deferred revenue, and percentage of completion method guide.