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

This post explains how Business Central handles time and materials billing, fixed fee billing, and milestone invoicing. It also covers job planning lines, work in progress accounting, and the built-in reports that keep project billing accurate. Each section explains which type of business the method suits best.

Most project-based businesses lose money on billing. They are not undercharging, but failing to capture everything they have done.

Logged time often goes unbilled. Material use frequently goes unrecorded. Out-of-scope work quietly disappears into a fixed fee. These losses build quickly, although most businesses only notice when the numbers land at month end.

Business Central’s project billing tools close that gap. Whether you charge by the hour, by material used, or by a fixed project fee, the system tracks costs and manages revenue. It also produces invoices automatically, without manual rebuilding.

This post explains how each method works and which type of business suits each one best.

The Jobs Module: Where Project Billing Starts

In Business Central, a “job” is the record at the centre of every Business Central project management project. It holds the client details, 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, feeding straight into your wider reporting dashboards.

Jobs work across every billing method. So 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 work starts, you set up job planning lines. These are individual lines within a job that define what you expect to do and charge.

Each line can represent a resource, such as a person or a piece of equipment. Alternatively, it can represent an item, a physical product or material drawn from inventory management. A third option is a general ledger account, for costs such as 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. The same lines become the basis for invoicing once work finishes. You can also set each line as budget only, billable, or both, which 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. The same happens when materials get issued from stock to a job, drawing on the same inventory data behind warehouse management. 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 main risk with time and materials is failing to log everything. Business Central reduces that risk because it ties time entry directly to the job, so nothing sits in a timesheet waiting for manual transfer.

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 run 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, while the budget lines track what the work actually costs. Business Central holds both figures in the financial management module, so you can see your margin in real time as the project progresses.

Fixed fees work well for businesses that can scope work accurately in advance, such as software development projects or marketing campaigns. The discipline required is keeping the budget lines updated as costs come in.

Milestone Billing: Invoicing in Agreed Stages

Many fixed fee projects do not get invoiced in a single payment. Instead, invoices go out at agreed stages, such as project kick-off, completion of a design phase, or final sign-off.

In Business Central, you structure this by creating a separate billable planning line for each milestone. Each line carries its own value and can be invoiced independently. When you reach a milestone, you run the invoice proposal for that line only and generate the invoice through the same sales process used for standard orders, while the remaining milestones stay in place for future billing.

This approach gives your client a clear payment schedule. It also gives your finance team a predictable invoicing calendar, because they can see which milestones have been billed and which are still outstanding.

WIP: Keeping Your Accounts Accurate Mid-Project

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

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 once you invoice the project.

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 several concurrent projects, this matters for accurate management accounts, particularly in manufacturing and engineering businesses managing multiple client builds at once, or in regulated life sciences and medical devices projects where phases often stretch across reporting periods.

Invoice Proposals: Building Invoices Without Building Them Manually

One of the more practical features in the jobs module is the “job create sales invoice” function. Rather than asking your team to build invoices line by line from a timesheet, this function pulls 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 due to be billed. You review it, adjust if needed, and post it.

This removes a significant amount of manual work from the billing process. It also reduces the risk of leaving billable items off an invoice, which matters most for businesses running several active projects at once. If this kind of automation appeals to you, our piece on Business Central features you’re paying for but not using covers other built-in tools worth switching on.

Job Ledger Entries: The Audit Trail Behind Every Posting

Every cost and revenue transaction on a job creates a job ledger entry. These entries record everything that has happened on a project, including time posted, materials issued, invoices raised, and 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. When a project’s margin looks wrong, the ledger entries show exactly where costs came in and what was billed against them, much like the audit trail behind purchasing approvals.

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

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

Many businesses combine billing methods on a single project. A common structure sets a fixed fee for the agreed scope of work, then uses time and materials billing for anything that falls outside that scope. This is a pattern we see often when discussing project setup with clients, including those weighing up why project costs run over budget, where scope creep is often the root cause.

Business Central handles this by allowing different line types within the same job. Contract lines carry the fixed fee value, while separate billable lines track out-of-scope time and materials. When you run the invoice proposal, both appear together, so 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, because they can see what was in scope, what was extra, and what each element cost. For businesses also managing supplier costs feeding into projects, our guide to vendor management in Business Central covers the purchasing side of the same problem.

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

Business Central includes 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, 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. You can also ask Copilot natural language questions about that same data without building a report from scratch.

The combination of built-in reports and Power BI gives you visibility at both the transactional level and the management level, so you never need to export data into spreadsheets. If you are comparing Business Central against other systems for this kind of project reporting, our breakdown of Business Central vs Sage 200 covers how the two platforms differ on project management specifically.

Project billing does not 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, which our implementation process is built around, then 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. Get in touch with our team to book a consultation or request a demo built around your projects.