OpEx (Operating Expenses)
Operating expenses (OpEx) are the ongoing costs a business incurs to run its day-to-day operations. These expenses are necessary for maintaining core business activities and are recorded on the income statement. OpEx typically includes costs such as rent, utilities, employee salaries, marketing, sales, insurance, office supplies, and maintenance, among others. Unlike capital expenditures (CapEx), which involve long-term investments in assets, OpEx is fully expensed in the accounting period in which it is incurred.
Operating expenses can be categorised into fixed costs, which remain constant regardless of business activity (e.g., rent), and variable costs, which fluctuate based on operational model, usage or sales levels (e.g., utilities or HR expenses). Managing and optimising operating expenses is crucial for maintaining profitability and operational efficiency. While reducing OpEx can improve short-term profits, excessive cuts may negatively impact productivity and customer satisfaction over time.
