Service companies (consulting firms, engineering practices, agencies, IT integrators, architecture studios) have a different economic engine than product businesses. Their inventory is time, their cost of goods is people, and their profitability is decided project by project. Yet a striking number run on spreadsheets that can't answer the most basic question: which projects actually made money? This guide explains project-based accounting and the ERP setup a Turkish service entity needs to see the truth.

Note: Revenue recognition, tax and contract treatments vary by situation. Confirm specifics with your CPA and group controller.

Why product-style accounting fails for service firms

A traditional chart-of-accounts P&L tells you the firm made or lost money overall. It does not tell you:

Which projects were profitable and which bled
Which clients are worth keeping
Whether a project is on track before it overruns
How much unbilled work (WIP) is sitting on the books
Which staff or teams deliver margin and which don't

For a service company, the project is the unit of profit. Accounting has to be organized around it.

The building blocks of project accounting

1. Project structure

Every project needs:

A project code and client link
A budget (hours and cost, by phase or task)
A contract type (fixed price, time-and-materials, retainer, milestone)
A planned timeline with phases/milestones

2. Time tracking

Time is the raw material. Staff log hours against projects and tasks. Without reliable time data, project costing is fiction.

Hours captured against project + task
Billable vs non-billable distinction
Approval workflow (project manager signs off)
Mobile/web entry: daily, not reconstructed at month-end

3. Cost capture

Beyond labor:

Subcontractor and freelancer costs
Travel and expenses charged to the project
Software, licenses, materials specific to the project
An allocation of overhead (office, admin, tools)

4. Revenue recognition

This is where service accounting gets nuanced:

Fixed price: revenue recognized as the project progresses (percentage of completion), not when invoiced
Time-and-materials: revenue as hours are delivered and approved
Retainer: typically recognized over the retainer period
Milestone: recognized as milestones are accepted

The gap between work delivered and invoices issued is WIP (work in progress), an asset on the balance sheet that many spreadsheet-run firms simply never track.

Work in progress (WIP)

Work in progress is delivered-but-unbilled value. It matters because:

It's a real asset: ignoring it understates the balance sheet
A growing WIP balance can signal a billing bottleneck (cash trapped)
At year-end, WIP valuation is an audit focus
It connects the P&L story to the cash story

A proper ERP computes WIP automatically: recognized revenue minus invoiced amount, per project.

Project profitability in real time

The payoff of project accounting is a live view:

Project	Budget	Cost to date	% complete	Forecast margin	Status
Client A redesign	...	...	...	...	On track
Client B rollout	...	...	...	...	Margin risk
Client C retainer	...	...	...	...	Healthy

The point is to see "margin risk" in week 3, not at the post-mortem.

Resource utilization

For a service firm, utilization (billable hours / available hours) is a core health metric:

Per person, per team, per period
Bench time visibility
Overallocation warnings (the route to burnout and quality problems)
Forecast utilization from the project pipeline

Billing discipline

Service firms leak revenue at the billing step:

Time logged but never invoiced
Milestones reached but invoice not raised
Out-of-scope work delivered without a change order
Expenses incurred but not passed through

The ERP should connect delivery to billing so nothing recognized goes uninvoiced.

The 6 mistakes service firms make

1. No project-level P&L The firm-level P&L hides which projects subsidize which.

2. Time tracked at month-end from memory Reconstructed timesheets are inaccurate; project costs become fiction.

3. WIP never tracked Delivered-unbilled value invisible; balance sheet understated, cash trapped silently.

4. Revenue = invoices Recognizing revenue when invoiced rather than when earned distorts every period.

5. Scope creep unmanaged Out-of-scope work delivered without change orders; margin quietly destroyed.

6. Utilization not measured Bench time and overallocation both invisible until they become a crisis.

ERP capability checklist

Birasyo's project accounting approach

Birasyo ERP's project module:

Project structure with phase/task budgets and client linkage
All major contract types (fixed price, T&M, retainer, milestone)
Time tracking (mobile/web, billable split, PM approval)
Full project cost capture including overhead allocation
Revenue recognition rules per contract type
Automatic WIP calculation per project
Live project profitability dashboard with margin-risk flags
Resource utilization reporting and overallocation warnings
Change-order workflow tied to scope and budget
Delivery-to-billing linkage so nothing recognized goes uninvoiced
TL + group-currency reporting

If you run a Turkish service entity and want to see true project profitability, book a session.

Sources

IFRS 15: Revenue from Contracts with Customers
VUK (Vergi Usul Kanunu): Turkish tax procedures
Türkiye Public Oversight Authority: TFRS materials

Project-Based Accounting for Service Companies in Türkiye