The Definitive Guide to Business Finance: What smart managers do with the numbers, Second Edition

Looking ahead: a footnote

In the foregoing discussion, I outlined the way that you project employee and other spending. There is one footnote required. It is not really feasible to estimate all your future revenue and spending to the last penny. Rather than allowing slack in any specific item of spending, you should estimate each one as accurately as possible. It would be good if in the event over-estimates cancelled out under-estimates. In practice, under-shooting is rare. Accordingly, it is usual to build in a contingency which can be raided if necessary. Provided that outturn is less than the projection for total spending including contingency, you will have met your planning figures. The contingency is usually added at the end of the spending ...