From the course: Accounting Foundations: Cost Estimating
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Elements of persuasive estimates
From the course: Accounting Foundations: Cost Estimating
Elements of persuasive estimates
- The reason you're estimating costs is to ultimately provide stakeholders with reliable and accurate costing. But what you're actually doing is delivering a persuasive message why stakeholders should or shouldn't proceed with an initiative. There are several characteristics for judging cost estimate quality. The first one is accuracy. A cost estimate is only as useful as it's accurate. The first step is selecting an appropriate and accurate estimating approach. Analysts improve accuracy by continually revising estimates as the project becomes more detailed and building allowances for unforeseen items like downtime, project reassessment and course corrections and risk contingencies. Take a kitchen renovation. If the contractor estimated properly, they would probably include a buffer for unforeseen issues like bad electrical or plumbing. Next, we need to address confidence level. Even the most accurate estimate…
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