From PROBOTIX :: wiki

Be aware that an 1/8" tool may not make an 1/8" cut. In fact if you measure your tool with calipers, you will most often find that the diameter at the flutes is not even what was advertised. The best way to address it is to make a test cut in the exact material at the same feed rate and depth of cut, then measure the width of the actual cut and use that as the diameter of your tool in your CAM software.