How Dynamics 365 Business Central Handles Project Billing: Time, Materials and Fixed Fee

Most project-based businesses are losing money on billing. Not because they are undercharging, but because they are not capturing everything they have done. 

Time logged but never invoiced. Materials used but not recorded. Out-of-scope work absorbed into a fixed fee. It adds up quickly, and most businesses don’t see it happening until the numbers land at month end. 

Dynamics 365 Business Central’s project billing tools are built to close that gap. Whether you charge by the hour, by material used, or by a fixed project fee, the system gives you a way to track costs, manage revenue, and produce invoices without building them manually. 

This post walks through how each method works inside Business Central, and which type of business each one suits. 

The Jobs Module: Where Project Billing Starts 

In Business Central, a “job” is the record that sits at the centre of every project. It holds all the information related to a piece of work: the client, the budget, the planned tasks, the costs incurred, and the revenue recognised. 

Every cost and every invoice on a project flows through the job. That makes it the single source of truth for project performance. You can see at a glance what has been spent, what has been billed, and what the current margin looks like. 

Jobs work across all billing methods. Whether you bill time and materials, a fixed fee, or a mix of both, the job record holds it together. 

Job Planning Lines: Setting Up What You Plan to Bill 

Before any work starts, you set up job planning lines. These are the individual lines within a job that define what you expect to do and charge. 

Each line can represent: 

• A resource (a person or piece of equipment) 

• An item (a physical product or material) 

• A general ledger account (for costs like subcontractors or expenses) 

You set the quantity, the unit cost, and the unit price for each line. 

Planning lines serve two purposes. They give you a budget to track against, and they become the basis for invoicing once work is complete. You can set each line as budget only, billable, or both. That controls what flows through to an invoice. 

Time and Materials Billing: Charging for What You Actually Do 

Time and materials billing is the most direct method. You charge for resources used and items consumed as the project progresses. 

When a team member logs time against a job, Business Central records the hours, applies the agreed rate, and marks the entry as billable. When materials are issued from stock to a job, the same happens. Every billable entry sits in the job ledger, ready to be picked up when you create an invoice. 

This method suits businesses where the scope of work is hard to define up front. Consultancies, IT support firms, and professional services teams often bill this way because the work varies from project to project and client to client. 

The risk with time and materials is failing to log everything. Business Central reduces that risk by tying time entry directly to the job, so nothing sits in a timesheet waiting to be transferred manually. 

Fixed Fee Billing: Charging a Flat Amount Regardless of Cost 

With fixed fee billing, the client pays a set amount for a defined piece of work. Your actual costs might be higher or lower than that amount, and Business Central tracks the gap between the two. 

To set up fixed fee billing, you mark the relevant job planning lines as billable and set the line type to “contract.” The contract value is what you will invoice. The budget lines track what the work actually costs. Business Central holds both, so you can see your margin in real time as the project progresses. 

Fixed fees work well for businesses that can accurately scope work in advance: software development projects, marketing campaigns, or any service with a clearly defined deliverable. The discipline required is making sure the budget lines are kept up to date as costs come in. 

Milestone Billing: Invoicing in Agreed Stages 

Many fixed fee projects don’t get invoiced in a single payment. Instead, invoices go out at agreed stages: project kick-off, completion of a design phase, delivery of a first draft, final sign-off. 

In Business Central, you structure this by creating separate billable planning lines for each milestone. Each line carries its own value and can be invoiced independently. When a milestone is reached, you run the invoice proposal for that line only, generate the invoice, and the remaining milestones stay in place for future billing. 

This gives your client a clear payment schedule and gives your finance team a predictable invoicing calendar. It also makes it easy to see which milestones have been billed and which are still outstanding. 

WIP: Keeping Your Accounts Accurate Mid-Project 

Work in progress (WIP) is an accounting concept that matters whenever a project spans more than one financial period. If you have incurred costs on a project but haven’t yet invoiced the client, your accounts need to reflect that the work has value, even though no revenue has been recognised. 

Business Central calculates WIP automatically based on the method you select for each job. Options include cost value, percentage of completion, and completed contract, among others. You post WIP at period end and reverse it when the project is invoiced. 

Getting WIP right means your profit and loss reflects the true state of your projects, not just what has been invoiced. For any business running multiple concurrent projects, this is essential for accurate management accounts. 

Invoice Proposals: Building Invoices Without Building Them Manually 

One of the more practical features in Business Central’s jobs module is the “job create sales invoice” function. Rather than asking your team to build invoices line by line from a timesheet or cost report, this function pulls all billable entries together and proposes an invoice automatically. 

You select the job, apply any filters (by date range or line type), and the system generates a draft sales invoice populated with everything that is due to be billed. You review, adjust if needed, and post. 

This removes a significant amount of manual work from the billing process and reduces the risk of leaving billable items off an invoice. For businesses running several active projects at once, it makes the end-of-month billing run far more manageable. 

Job Ledger Entries: The Audit Trail Behind Every Posting 

Every cost and revenue transaction on a job creates a job ledger entry. These entries are the detailed record of everything that has happened on a project: time posted, materials issued, invoices raised, credit notes applied. 

Job ledger entries give you a complete audit trail. If a client questions an invoice, you can trace every line back to the original posting. If a project’s margin looks wrong, the ledger entries show you exactly where costs came in and what was billed against them. 

They also feed the reporting layer, which means your project reports are always based on posted transactions rather than estimates or manual summaries. 

Combining Billing Methods: Fixed Fee for Scope, Time and Materials for Extras 

Many businesses use a combination of billing methods on a single project. A common structure is a fixed fee for the agreed scope of work, with time and materials billing for any work that falls outside that scope. 

Business Central handles this by allowing different line types within the same job. Your contract lines carry the fixed fee value. Separate billable lines track out-of-scope time and materials. When you run the invoice proposal, both appear together. You can invoice them on the same document or separately, depending on your preference. 

This approach protects your margin on the core scope while making sure additional work gets captured and charged. It also gives clients transparency: they can see what was in scope, what was extra, and what each element cost. 

Reporting: Seeing What’s Billable, What’s Billed, and What’s Left 

Business Central includes a set of built-in reports for the jobs module that cover the most common project reporting needs: 

• The Job Analysis report shows planned versus actual costs and revenue by job 

• The Job WIP report shows the current WIP position across all active projects 

• The Job Suggested Billing report shows what is outstanding and ready to invoice 

• The Job Actual to Budget report compares what was planned against what has been posted 

For businesses that need more detail or want to combine project data with financial data from elsewhere, Power BI connects directly to Business Central and lets you build custom dashboards. A typical project billing dashboard might show billable hours by team member, revenue by project type, unbilled work by client, and margin by job across a rolling period. 

The combination of built-in reports and Power BI gives you visibility at both the transactional level and the management level, without needing to export data into spreadsheets. 

Project billing doesn’t have to be a source of lost revenue or manual effort. Business Central gives you the tools to capture costs accurately, bill clients correctly, and keep your accounts up to date throughout the project lifecycle. The key is setting up jobs properly at the start and making sure your team logs time and costs against the right records as work progresses. 

Talk to Tecvia 

If you want to see how Business Central’s project billing tools could work for your business, Tecvia can walk you through a practical demonstration using your own project scenarios.