There are lots of different methodologies that guide businesses as they attempt to manage the market, grow their stable of clients, and plan for a future that isn’t just a month away but hopefully years away. That can mean that one idea of how to conduct a business, including managing a budget and setting revenue and expense expectations, may be in place and not changed — who has time to consider such a thing? However, it’s important to understand the implications of what you’ve chosen to use as your financial guidance for your business.
Let’s talk about the percentage of completion method first. This method states that businesses are able to recognize a portion of revenue and expenses as a job is completed. For example, when a construction company is halfway done with a building, they can recognize half of the money in and money out, according to these principles. What else do you need to understand about this? This graphic explains it.
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