Revenue recognition in Productive determines how revenue from your budgets is distributed over time. This process ensures that your financial reporting accurately reflects the actual work completed and expenses incurred.
It is essential to understand the various factors that influence revenue recognition, including service billing types, unit types, and related financial items such as time entries, bookings, and expenses.
Financial Items and Revenue Recognition
Four main financial items in Productive affect revenue recognition:
1) Services
Fixed billing type services automatically generate revenue, while Time and Materials billing type services do not generate revenue on their own. Time entries, bookings, and expenses associated with these services generate or assume revenue.
2) Time entries
Only approved time entries contribute to revenue. Revenue is determined based on the tracked time multiplied by the service price.
3) Bookings in the Resource Planner
Only future bookings are considered for revenue recognition. Revenue is calculated based on the booked time multiplied by the service price.
👉 Learn how tentative bookings affect recognized revenue.
4) Expenses
Only approved billable expenses affect revenue. The billable amount of the expense determines the revenue.
Service Configuration
When setting up your services, both the billing type and the unit type affect how revenue is recognized.
Service Billing Types
There are three service billing types in Productive, each influencing revenue recognition differently:
Time and Materials — these services do not generate revenue on their own. Time entries, future bookings, and expenses tracked against them generate revenue.
Fixed — these services generate revenue on their own. Time entries, future bookings, and expenses tracked against them may assume a part of that revenue.
Non-billable — these services never generate revenue, and neither do the associated time entries, bookings, or expenses.
Service Unit Types
There are three unit types when setting up a service in Productive:
Hour — time entries and bookings generate or assume revenue directly proportionate to the service price. For example, if each hour is valued at $150, each approved hour tracked or booked generates or assumes $150.
Day — nearly identical to hours. Approved time entries and future bookings generate or assume revenue based on your settings. How many hours there are in a person-day is set up in Settings > General, under Person-days.
Piece — time entries and bookings will never generate or assume revenue. Only approved expenses generate or assume revenue (based on the billing type).
Time and Materials Services
With Time and Materials services, revenue is recognized when work is logged and approved in Productive, and when you create future bookings in the Resource Planner.
The tracking unit dictates what can be tracked and recognized:
Hour/Day — time entries and future bookings contribute to revenue.
Piece — only approved expenses generate revenue.
Examples (click here)
Examples (click here)
TIME AND MATERIALS SERVICE BY HOURS OR DAYS
The service itself does not generate any revenue. When you log and approve hours or days and book people for the service in the Resource Planner, recognized revenue appears in reports (e.g. the Financial Items report).
📌 Note that you cannot track expenses against a service set up this way, as its unit is Hour or Day, not Piece.
TIME AND MATERIALS SERVICE BY PIECE
The service itself does not generate any revenue, and no time entries or bookings can be made for it.
Each expense tracked against this service generates revenue. The expense needs to be approved (if expense approvals are enabled) before it's recognized as revenue.
Fixed Services
There are two org-level options for recognizing revenue with fixed billing, set in Settings > Revenue recognition:
1) Recognized on a single date
All revenue stays linked to the service and is recognized on a single date that you select.
2) Recognized as time and expenses are approved
Revenue is distributed over time. As you log hours, days, and expenses, and make future bookings, revenue is allocated to those financial items and subtracted from the total fixed amount on the service. Any remaining revenue is retained on the service as surplus.
👉 For a detailed explanation of these two options, see Fixed Price Revenue Recognition Models.
3) Custom revenue recognition
In addition to the org-level settings above, you can override revenue recognition on individual budgets. Custom revenue recognition lets you distribute fixed price revenue across even or manually defined periods, independent of time tracking activity.
👉 Learn more in Custom Revenue Recognition for Fixed Price Budgets.
How unit type affects Fixed services
The tracking unit defines what can be tracked and what triggers revenue transfer:
Hour/Day — time entries and bookings contribute to revenue.
Piece — only approved expenses generate revenue.
Examples (click here)
Examples (click here)
FIXED SERVICE BY HOURS OR DAYS
The service itself generates the entire revenue — you can invoice the full budget before logging any hours or expenses.
Each approved time entry or future booking assumes revenue, meaning revenue is transferred from the service to the time entry or booking.
📌 The revenue linked to the service decreases as time entries and bookings are logged. This is important to keep in mind when analysing financial reports.
Note that you cannot track expenses against this service, as its unit is Hour or Day, not Piece.
FIXED SERVICE BY PIECE
The service generates the entire revenue, but only logged and approved expenses assume revenue.
📌 Time tracking and bookings can be enabled for Piece services, but they will not trigger revenue transfer. If you need to track revenue over time, use Hour or Day as the unit type instead.
Non-Billable Services
Non-billable services do not generate revenue, only costs.
📌 Note that all internal budgets can contain Non-billable services only.
Depending on how and what you need to track when it comes to non-billable services, choose hour, day, or piece as the tracking type.
