Information & technology services: Project-based revenue

Published Thursday 9 July 2026

Table of contents

• What is project-based revenue in IT services?
• How project accounting differs from managed services
• What to track to run profitable IT projects
• How you can recognise revenue for IT projects
• Common mistakes to avoid
• Streamline project revenue with Xero
• FAQs on IT services accounting

Key takeaways

• Track time, costs, work in progress, deposits and progress claims to protect margins and cash flow across every project.
• Recognise revenue for time and materials, fixed-fee milestones or over-time delivery under Australian Accounting Standards Board (AASB) 15.
• Keep monthly recurring revenue separate from one-off projects so you can see true margins and growth.
• Enforce change control and bill on time to scale without spreadsheet sprawl.

What is project-based revenue in IT services?

Project-based revenue is income from delivering specific pieces of work with a defined scope, timeline, and deliverables. For IT businesses, that typically means:

• Software development
• System implementations
• Infrastructure upgrades
• Cybersecurity audits
• Digital transformations
• Custom integrations

Unlike recurring income from managed services, project revenue is one-off or irregular. Each project has its own budget and profitability profile. The work has a clear start and end.

Why it matters for accounting

The timing of when you do the work, invoice, and recognise revenue can all be different. You need to track work in progress accurately, manage scope changes, and make sure you're billing enough to cover costs.

For accounting for tech startups and established IT companies, getting this right means you can quote accurately, deliver profitably, and scale without losing control of cash flow. That's the foundation of solid technology services accounting.

How project accounting differs from managed services

The key difference is how you recognise revenue and track profitability.

Managed services:

• Same amount billed each month for ongoing support
• Predictable revenue recognised evenly over time
• Focus on cost to serve, utilisation rates, and churn
• Regular, predictable cash flow

Project work:

• Revenue timing depends on contract terms: milestones, percentage of completion, or time & materials
• You track against a fixed budget or estimate
• Cash flow can be lumpy, with big deposits, progress claims, final payments
• Need job costing, WIP tracking, and milestone billing

In IT services accounting, many businesses run both models. Your managed services provide stable recurring revenue while projects bring larger one-off fees. But keep them separate in your books because mixing them makes it impossible to see true project margins.

Bookkeeping for IT services needs systems that handle both without creating spreadsheet sprawl.

What to track to run profitable IT projects

Without visibility into time, costs, and progress, you can't protect margins or make smart decisions.

Time and materials by task

Time tracking is the foundation of IT project accounting software. You need to know exactly how many hours each team member spends on each project and task. For time & materials work, timesheets drive invoicing directly. For fixed-fee work, time tracking shows your true delivery cost. Cloud accounting for IT consultants connects with apps like Harvest, WorkflowMax, and Practice Ignition for end-to-end workflows.

Fixed-fee budgets and scope

Quote a price, deliver to that scope. If costs exceed your estimate, margins shrink. If scope creeps without adjustment, you lose money. Set your budget and track actual costs weekly. Project tracking tools make this easy. Document what's included in the fixed fee and what triggers extra charges.

Work in progress (WIP) and unbilled revenue

WIP is work you've done but haven't invoiced yet. For IT services accounting, this is critical as you might do big chunks of work in one month but not bill until later. Example: halfway through a $50,000 project with $25,000 in costs incurred = $25,000 WIP on your balance sheet.

Change orders and variations

Clients discover new requirements. Technical challenges emerge. Without change control, scope creep kills margins. Every change order should update your budget and be approved before work starts. In your accounting software for IT company workflows, changes should flow through to project tracking.

Direct costs and expenses

Contractor fees, cloud hosting, software licences, travel: these reduce margins dollar for dollar. Code them to the right project. Automated invoicing for IT services can pull expenses straight into progress claims without manual entry.

You can also assign costs to each job with job costing to see true project profitability.

How you can recognise revenue for IT projects

Project revenue recognition follows AASB 15: recognise revenue when you transfer control of goods or services to the customer.

Milestone billing vs percentage of completion

Milestone billing:

• Recognise revenue when you complete specific deliverables
• Example: 30% on design approval, 40% on build, 20% on testing, 10% on go-live
• Works well for software development accounting with clearly defined deliverables

Percentage of completion:

• Recognise revenue based on how much you've finished
• 60% through a project = 60% of contract value as revenue
• Needs solid data from your IT project accounting software

Accrued revenue and deferred revenue

• Accrued revenue: You've earned it but haven't invoiced. In technology services accounting, this builds up when billing lags delivery.
• Deferred revenue: You've been paid but haven't earned it yet. That $30,000 deposit is a liability until you deliver. Critical for SaaS accounting software companies.

Multi-currency projects

Working with international clients? Your accounting software for IT company needs to handle multiple currencies and track exchange impacts. Cloud accounting for IT professionals automates the calculations.

Tax and GST on progress claims

For GST, you charge it on invoices and remit via BAS. The ATO's GST bookkeeping guide explains how to classify sales and purchases. TPAR applies if you pay contractors for IT services.

The ATO's record-keeping rules set out what you need to keep and for how long.

Common mistakes to avoid

A few recurring errors quietly erode margins on IT projects. Watch for these.

Mixing recurring revenue with project income

When you lump managed services and project income together, you can't see true project margins or recurring revenue growth. Set up separate accounts and use tracking categories in your accounting software for IT company workflows.

No change control

'Just one more feature' adds up faster than you'd expect. A few unpriced changes can quietly turn a profitable project into a loss. Protect your margins by documenting every change request, estimating the cost impact, getting client approval in writing, and updating the project budget before work begins.

Spreadsheet sprawl

Spreadsheets break, formulas get overwritten, errors hide until they cause problems. Invest in proper IT project accounting software that integrates time tracking, invoicing, and bank feeds. For bookkeeping for IT services, integrated systems mean time tracking flows to job costing flows to WIP flows to invoicing. Less data entry, better decisions.

Delayed invoicing

Every day you delay invoicing is a day you're not getting paid. Set billing milestones at the start of each project and send invoices the moment you hit them. For time and materials work, invoice monthly at minimum, or weekly if cash flow is tight. Automated invoicing makes this easier, turning what used to be an end-of-month admin task into something that happens in the background.

Streamline project revenue with Xero

Xero gives you tools to track IT project revenue, manage WIP, and run your business from one platform.

What you can do:

• Set up projects, track time and costs, generate progress claims.
• Connect bank feeds and reconcile automatically.
• Use project tracking to monitor budgets and spot problems early.
• Run recurring invoices for managed services alongside project billing.
• Track GST and TPAR obligations.

Xero integrates with specialist tools designed for IT services accounting, including Practice Ignition, WorkflowMax, and Harvest. These integrations let you build a workflow that suits your business, whether you're tracking billable hours, managing projects, or moving toward value-based pricing to maximise what each engagement is worth.

With multi-currency support, mobile apps, and cloud access for both you and your accountant, you can work from the same real-time data, with no version confusion or waiting for end-of-month updates. Start today and get one month free.

FAQs on IT services accounting

Here are answers to common questions about accounting for project-based revenue in IT services.

What is the difference between project revenue and managed services revenue?

Project revenue is one-off income from defined work (software builds, implementations). Managed services revenue is recurring monthly income from ongoing support. Track them separately to understand profitability of each.

How do I handle deposits and progress claims?

Record deposits as deferred revenue (a liability), not income. As you deliver, move portions to revenue. For progress claims, invoice when you're entitled to bill and recognise revenue in the same period. Project tracking tools help manage this.

When should I recognise revenue for a fixed-fee IT project?

Under AASB 15, recognise revenue as you deliver, either at milestones or using percentage of completion. Don't recognise it all when you sign the contract or send the invoice. If you're 50% complete on a $100,000 project, recognise $50,000 as revenue even if you haven't billed yet.

Does TPAR apply to IT services?

Yes. If you pay contractors for software development, programming, IT support, or cybersecurity, report those payments in a taxable payments annual report, due to the ATO by 28 August each year. Keep records of contractor ABNs, addresses, and gross payments. Accounting software can help track and report TPAR.

Can I run multi-currency projects?

Yes. Invoice in different currencies, pay suppliers in their currencies. Good accounting software tracks exchange rates, calculates gains and losses, and shows the impact on your financials. Useful for IT consultancies with international clients or offshore contractors.