There are a number of concepts I’ve learned in my career which have to do with developing financial predictability. It’s a skill that has helped me both personally and professionally. Here’s the list:

1. Self Funding – this is the concept that when there is a new need, you don’t ask for more money, you don’t spend beyond your planned expenses. You figure out a way to self-fund: either horsetrade with something else, or figure out how to reduce your expenses to cover the cost. Whenever there was an unplanned new expense popping up at work, people were quick to ask me for more money to cover it. Nope…let’s figure out how to self fund….you mean to tell me there’s no way for you to self-fund it with a budget of millions? Really?
2. Contingency-this is a fund which you have for those situations you can’t self fund because the cost is too big or it’s too late in the year to make it up. In personal life, it’s often the emergency fund. It’s important because when you have to cover the expense and you don’t have a contingency fund, the other options are much more expensive. In personal life, you’re getting charged interest. In professional life, you are telling someone you’re not making the plan.
3. Risks and Opportunities – it’s great to have forecasts and plans. But the unexpected happens…both to the good and to the bad. So when it’s good …e.g something is cheaper than you thought, you get a windfall, you book the opportunity, usually in contingency. You don’t go spend it…you build on your contingency even more. Why? Because risks are when things go the wrong way…..expenses you see coming down the horizon but haven’t happened yet. You want to make sure you’re covered…you don’t want to be caught without the ability to pay.
4. Tasks – probably the least favorite thing, but important. This is when you put a task on yourself to do better….often it means to spend less. Yes, companies will come up with targets, but you probably know better than anyone where there’s money that can be given back. Rather than waiting for someone to ask you to reduce your expenses, you do this yourself as a goal just to be more efficient.
5. No Netting– this is a big one with me so much so I had a sign on my wall that had “netting” in a big circle with a slash through it. I really don’t like when people net numbers. I want to see the two numbers separately, and then the net. Someone tells me the project is net $40k better but what they didn’t tell me is that it’s because they overbudgeted and the cost came in lower. So it sounds like good news, but it really isn’t.

I am passionate about numbers. What’s funny is that I am not good with numbers. If you ask me to do math in my head, I’m hopeless. But I really like numbers because they are great ways to monitor progress, hold people accountable, and keep everyone moving in the same direction. You just have to use the numbers in the right way.