> ## Documentation Index
> Fetch the complete documentation index at: https://help.ruddr.io/llms.txt
> Use this file to discover all available pages before exploring further.

# Fixed Fee Revenue Recognition: Percentage of Time & Materials Revenue

> This method recognizes fixed fee revenue based on the time and materials value of work delivered at bill rates, ideal when rates vary across roles.

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 and 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. If the project uses [rate cards](https://help.ruddr.io/projects/project-rate-cards.md#fixed-fee-projects), the bill rates come from the budget's rate card.

***

## 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:

1. Track T\&M revenue generated to date
2. Estimate total projected T\&M revenue
3. Calculate percent complete
4. Recognize revenue based on that percentage

***

## How Ruddr calculates revenue

For each recognition period, Ruddr:

1. Calculates **T\&M revenue to date**
2. 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)
3. Calculates **percent complete**
4. Calculates **total revenue earned to date**
5. 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 and 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 and 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

***

## Learn more

* [Fixed Fee Revenue Recognition](https://help.ruddr.io/projects/fixed-fee-revenue-recognition.md)
* [The Revenue Recognition Ledger](https://help.ruddr.io/projects/the-revenue-recognition-ledger.md)


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