What is percentage of completion?
Percentage of completion is a way to recognize revenue on a long project in proportion to the work completed, often measured by costs incurred against total estimated costs. Under ASC 606 the same idea appears as measuring progress toward satisfying a performance obligation over time, and cost-to-cost is a common input method. If a job is 40 percent complete by cost, 40 percent of its contract value is recognized.
Why it matters to a revenue leader
In a project-heavy services business, percentage of completion links the estimate your team bid to the revenue the company reports. If the cost estimate is too low, the job looks further along than it is, revenue is pulled forward, and the correction lands later as a margin write-down. Change orders, scope creep and delayed starts all move the number. That makes bid discipline a revenue recognition issue as much as a margin issue.
How to calculate it
Percent complete = costs incurred to date divided by total estimated costs. Revenue to date = percent complete times contract value. A common mistake is counting materials delivered to site but not yet installed as progress, which overstates completion; the accounting guidance excludes or adjusts costs that do not reflect performance.
Example
Fictitious numbersA mechanical contractor wins a $600,000 boiler replacement with $450,000 of estimated cost. By month end it has spent $180,000, so the job is 40 percent complete and $240,000 of revenue is recognized. If the cost estimate rises to $500,000, the same spend means 36 percent complete and $216,000 of revenue.
"Which of our open projects carry cost estimates older than their last change order?"
Sources
- Percentage of Completion Method (Corporate Finance Institute) checked 9 Oct 2026
- 8.5 Measuring Progress for Revenue Recognized Over Time (Deloitte Accounting Research Tool) checked 9 Oct 2026