Project-based revenue is income received from project outputs or project results. This type of revenue is usually earned on an irregular basis, as opposed to, for example, recurrent or transactional revenues which are earned on a regular basis.
What is the nature of project-based revenue?
If you provide your services or deliveries in the form of projects, you have to realize that your revenues will be irregular. A project usually lasts for months or years and the revenues are generated either only once the project is finished, or some partial amounts are paid by the customer at some pre-arranged points. These points are called project milestones and they usually end some stage of a project that can be defined through a measurable or evaluable output. For example, a project of building a house can have three milestones: first milestone can be defined as finished foundations, second as completed rough construction and then the house is built (the third milestone is the end of the project).
However, project revenue does not always have to be related to milestones or to the end of the project. For example, projects that require a high proportion of human work, can be paid on a monthly basis, usually based on an activity report.
From a cash-flow perspective, sufficient funding (or additional funding) is needed to pay for the necessary resources (people, technology, travel expenses, subcontracts, etc.) and to overcome the period before the customer pays for the project.