An operational expenditure (OPEX) is the money a company spends on an ongoing, day-to-day basis to run a business or system.
They are the costs that a business incurs while turning its inventory into an end product. Hence, depreciation of fixed assets that are used in the production process is considered operational expenditure. OpEx is also known as operating expenditure, revenue expenditure or an operating expense.
Depending upon the industry, these expenses can range from the ink used to print documents to the wages paid to employees. The counterpart, Capex, is the money spent on the improvement or purchase of fixed assets.
Operational expenditure is essential to consider as they accurately reflect the costs of doing business since no future benefits are gained.
If the Opex is too high, a company can quickly lose money.
Unlike Capex, the debt of which can be offset by future benefits, suffering deficit to pay for operational expenditure is always a problem.
Operating expenses are necessary and unavoidable for most businesses. Some firms successfully reduce operating expenses to gain a competitive advantage and increase earnings.
However, reducing operating expenses can also compromise the integrity and quality of operations. Finding the right balance can be difficult but can yield significant rewards.
The Internal Revenue Service (IRS) allows businesses to deduct operating expenses if the company functions to earn profits.
However, the IRS and most accounting principles distinguish between operating expenses and capital expenditures.
Often abbreviated as OPEX, operating expenses include rent, equipment, inventory costs, marketing, payroll, insurance, and funds allocated for research and development.
One of the typical responsibilities that management must contend with is determining how to reduce operating expenses without significantly affecting a firm’s ability to compete with its competitors.
You might be interested in CAPEX training as a next step.
YOU WILL LEARN HOW TO
Operating expenses are necessary and unavoidable for most businesses. Some firms successfully reduce operating expenses to gain a competitive advantage and increase earnings.
IMPORTANT COURSE INFORMATION
Certificate
Students will receive Strategic Axis professional certificate accredited by UAE Government.
COURSE OUTLINE
What are operating expenses (OPEX)?
Define your terms! What does “operating expense” mean?
Operating expense role in budgeting and spending
Operating expense role on the Income statement
How do operating expenses bring tax savings?
Example Income statement with operating expenses
What are operating expenses (OPEX)?
Define your terms! What does “operating expense” mean?
Operating expense role in budgeting and spending
Operating expense role on the Income statement
How do operating expenses bring tax savings?
Example Income statement with operating expenses
Module 2: Explaining Operating Expense in Context
The Meaning of Expense-Related Terms
Expenses Use Up Assets
Operating Expenses and Non-Cash Expenses
Operating Expense Role in Budgeting and Spending
Understanding the OPEX Budget
The Operating Expense (OPEX) budget in the budget hierarchy
Operating Expense Role on the Income Statement
Significant Expense Item Categories
How Do Operating Expenses Bring Tax Savings?
Module 3: OpEx with Virtualization and Virtual Systems Management
OpEx Reduction – Reality of Virtualization
Key Virtualization KPIs to Measure OpEx Savings
The frequency of Service Failures
Mean Time to Repair (MTTR)
Improved Staff Efficiency
Faster Service Deployment and Migration
Overall Ease of Management
Module 4: OPEX: Calculating, Reports and Analysis
Approaches to OPEX forecasting
-Bottom-up forecasting
-Base-step-trend forecasting
Operating expenditure categories
Base, step and trend forecasting approach
Links between capital and operating expenditure forecasts
Operating Expense Ratio (OER)
Operating Expense Control
Criticality Analysis for optimizing OPEX cost lifecycle
