Steve Davies Online

Return on Investment (ROI) has become a buzzword over the last decade, but the reality is that many people, especially these days, are averse to making investments in their business. They want to see the returns, for sure, but seem to think (or hope at least) that the return can come even if they don’t make the investment.

The measurement of contract revenue streams present some interesting challenges, both in the ways that they can be recorded on the financial statements and in the ways that they can be used to report wins and losses. In this article I will look only at how they can be more meaningfully presented on the financial statements.

Any company that sells time has what amounts to an inventory of future hours that its clients have committed to buy from it at an agreed rate. This commitment may either be firm or contingent on future events, but it is important to find a way to calculate the size of the inventory on hand at any point as this is an important measurement of workload and ultimately of future revenues.