> ## Documentation Index
> Fetch the complete documentation index at: https://docs.spicom.co/llms.txt
> Use this file to discover all available pages before exploring further.

# How Calculations Work

> Learn how Spicom calculates real margins, cost allocation, and 12-month financial projections.

# How Calculations Work

This page explains how Spicom computes margins, contract profitability, and cost allocation.\
The goal is full transparency so you always understand how every number is produced.

***

## Margin Formula

Spicom uses a **real FP\&A margin calculation**, not a simplified “revenue – salary”.

The real margin formula:

```text theme={null}
real_margin = revenue - workforce_cost - global_cost_allocation
```

And the margin percentage:

```text theme={null}
margin_percentage = real_margin / revenue
```

This gives you a true picture of contract profitability.

Workforce Cost Allocation (Days-Based)
Spicom allocates workforce cost using a fixed reference of 20 working days per month.
For each person:

```text theme={null}
allocation_percentage = days_on_contract / 20
allocated_cost = real_cost * allocation_percentage
```

Example:

```text theme={null}
Developer real cost: €5,320
Days on Contract A: 5
allocated_cost = 5320 * (5/20) = €1,330
```

***

Workforce cost distribution is recalculated instantly when you:

* change days worked
* add a new contract
* adjust salaries or freelance rates

***

### Global Cost Allocation

Your Global Costs (rent, tools, insurance, admin, etc.) are spread evenly across all active contracts.

Formula:

```text theme={null}
global_cost_per_contract = total_global_costs / number_of_active_contracts
```

Example:

```text theme={null}
Global costs: €1,180
Active contracts: 4
global_cost_per_contract = 1180 / 4 = €295
```

This ensures every contract carries its fair share of fixed costs.

***

###

Contract Profitability Calculation
For each contract:

```text theme={null}
contract_margin = contract_amount - workforce_share - global_cost_share
```

Example:

```text theme={null}
Amount: €3,000
Workforce: €2,100
Global: €295

margin = 3000 - 2100 - 295 = €605
```

Margin %:

```text theme={null}
605 / 3000 = 20.1%
```

***

### Revenue Projection (12 Months)

Spicom uses confirmed contract dates only — no predictions, no AI guessing.

For each month:

* Check if the contract is active (start ≤ month ≤ end).
* Add the contract amount to that month’s revenue.
* Aggregate all active contracts.

This produces a clean, reliable financial forecast.

Example:

```text theme={null}
Contract A: Jan → Dec
Contract B: Feb → Oct
Contract C: Mar → May
```

The forecast automatically adjusts:

* when contracts end
* when amounts change
* when new contracts are added
* inside simulations

***

### Simulation Calculations

Simulations apply temporary overrides to:

* contract amount
* contract active status
* contract stop
* contract reduction
* future projections

Spicom recalculates in real time:

***

### Full Example (Combined)

Let’s take a contract:

Amount: €3,000
Workforce allocation: €1,900
Global cost share: €250

Margin:

```text theme={null}
3000 - 1900 - 250 = €850
margin_percentage = 850 / 3000 = 28.3%
```

In simulation, if the price increases to €3,400:

```text theme={null}
new_margin = 3400 - 1900 - 250 = €1,250
margin_percentage = 1250 / 3400 = 36.7%
```

Clear, transparent, audible.

***

### Best Practices

* Update contract amounts when you renegotiate
* Keep workforce day allocations honest
* Review global costs monthly
* Use simulations to test renewals or stops
* Always compare real vs simulated margins