Project Billing and Revenue Management
What the domain tests
Billing and Revenue Management tests bill plans, billing methods, invoice generation, revenue recognition methods, billing events, and the reconciliation of revenue to billing under ASC 606 or IFRS 15 concepts.
Core rules
- A bill plan defines the billing method, bill rate schedule, invoice format, billing cycle, and customer. A revenue plan defines the revenue recognition method.
- Billing methods include rate-based, percent complete, milestone, and cost-plus. Revenue methods include cost-to-cost percent complete, rate-based, and milestone.
- Billing and revenue are separate processes. You can recognize revenue before or after invoicing, creating unbilled or deferred balances.
- Billing events control when an item becomes billable; invoice generation groups eligible events.
- Revenue adjustments correct recognized revenue without changing the original invoice.
Worked example
A contract has a total value of $1,000,000 and estimated total cost of $800,000. Actual cost to date is $200,000. Cost-to-cost percent complete = $200,000 ÷ $800,000 = 25%. Revenue recognized = 25% × $1,000,000 = $250,000. If billed to date is $200,000, the unbilled receivable is $50,000. Reasoning: revenue follows progress; billing follows the bill plan; the difference is a balance-sheet position.
Traps
Do not use the billing method as the revenue method. Do not assume percent complete is always cost-based; it can be quantity- or labor-based. Do not recognize revenue from an invoice alone. Check bill rate versus cost rate. Milestone billing does not necessarily match milestone revenue.