Unbilled Revenue (WIP Hours)

What Is Unbilled Revenue (WIP Hours)?

In a time-based services business, consultants log hours against a client throughout the month, but billing often happens on a cycle or a milestone that lags the work. Unbilled revenue captures the value of hours worked but not yet invoiced, so the accounts recognise revenue as it is earned. Under Ind AS 115 it is a contract asset — a right to consideration that is conditional on something more than the mere passage of time, which is what distinguishes it from a plain trade receivable.

An Indian consultancy, agency, law firm or IT services company meets unbilled revenue at every month-end. A Gurugram consulting firm that has delivered 400 chargeable hours in a month but will only raise the invoice after client sign-off carries the value of those hours as unbilled revenue, then reclassifies it to receivables once the invoice is issued. Without it, revenue lurches with the billing calendar rather than tracking the work actually done.

How Unbilled Revenue (WIP Hours) Works

Worked hours become recognised revenue and then a receivable through set steps:

1. 1Log chargeable hours

   Staff record time against each client and project in the timesheet system — the source of the WIP value.

2. 2Value the WIP

   Hours are priced at agreed charge-out rates to give the earned value for the period.

3. 3Recognise unbilled revenue

   At month-end the earned-but-uninvoiced value is booked as revenue and a contract asset (unbilled revenue).

4. 4Raise the invoice

   When the billing cycle or milestone arrives, the invoice is issued to the client for the work done.

5. 5Reclassify to receivables

   On invoicing, unbilled revenue is moved to trade receivables, and GST is accounted for at the time of supply.

Where Unbilled Revenue (WIP Hours) Applies — Professional Services Firms

Unbilled revenue arises wherever work is delivered ahead of the invoice:

• Consulting and advisory firms — Chargeable hours accumulate before periodic or milestone billing.
• Law and accounting practices — Time is logged against matters and billed on completion or cycle.
• Agencies and studios — Creative and marketing work is delivered ahead of invoicing.
• IT and engineering services — Effort on projects is earned before the billing milestone.
• Any timesheet-driven business — Firms that sell time recognise revenue as hours are worked, not merely when billed.

See also: Service Sector Accounting (Project Billing) SaaS Accounting Services (IT & SaaS)

Unbilled Revenue (WIP Hours): A Practical Example

A Gurugram consulting firm logs 400 chargeable hours on a client in August at a ₹2,000 charge-out rate, but bills only after sign-off in September. At 31 August it recognises ₹8,00,000 of unbilled revenue as a contract asset, so August's profit reflects the work done. When the invoice goes out on 5 September, the ₹8,00,000 shifts to trade receivables and GST is accounted for at the time of supply — revenue tracks effort, not the billing calendar.

Common Mistakes With Unbilled Revenue (WIP Hours)

Unbilled revenue misstates results when it is mishandled at the edges:

• Recognising revenue only on invoicing — Waiting for the invoice understates the month the work was done → recognise earned WIP as revenue at period-end.
• Valuing unrealistic hours — Booking hours unlikely to be billed inflates revenue → provide against non-recoverable or written-off WIP.
• Not reclassifying to receivables — Leaving invoiced work in unbilled revenue double-counts the asset → move it to receivables on invoicing.
• Confusing the GST timing — Assuming GST is due when WIP is recognised is wrong → account for GST at the time of supply, usually on invoicing.

Related Accounting Terms

Terms read alongside unbilled revenue:

• Milestone vs Retainer Billing — How the billing cycle is structured.
• Project-Wise Profitability Margin — Profit measured per project.
• GSTR-2B Input Tax Credit Matching — Input-credit reconciliation.
• Accounting Terms Glossary — Browse every accounting term in one place.