Operating expenses. What it is?

In this article, you will learn what operational costs (abbreviated OPEX) are and what they are related to. This term is often used in corporate finance, and it usually refers to those costs that arise periodically during business.

Operating expenses are those expenses that are related to the management of an enterprise and its activities for the sale of goods and products; This is the cost of running a business, which includes any costs associated with the immediate operation of the company. They systemize the expenses of the reporting period, not related to direct production. FAS "Expenditures" organize the groupings of expenditures of the operating activity of an enterprise on certain economic elements:

- labor costs;
- depreciation is the difference that arises when assets such as manufacturing equipment or vehicles are gradually worn out, so that their market value becomes somewhat lower than the original (this item will relate to operating expenses if these assets are used by the business in its operating Activities);
- deductions of financial resources for social activities;
- expenses for labor remuneration of employees - the most common item of operating expenses, in some cases it occupies the greatest weight in the total costs of the enterprise;
- other operating expenses are marketing, advertising, payment of licenses and legal services, stationery, payment of utilities, expenses for purchasing the necessary raw materials, costs for research and scientific activities.

It is worth noting that in addition to operating, there are also capital costs (abbreviated CAPEX). They, for example, may include the cost of a one-time purchase of new equipment, when the old is completely worn out, that is, it is depreciated.

Why is it common to divide capital and operating expenses? This is due to the fact that any investors and company management should get a more accurate picture of where the funds were spent before the profit was received. For example, the operating costs of the bank - this is pay, purchase of office supplies, and capital - the purchase of premises.

Analytic accounting of operating expenses of an institution or enterprise is organized, taking into account the nature of the activity, the features of the work and services performed. Thoughtful formation of analytical accounting is important for determining the methodology, analysis, their essence, as well as for objective reflection of financial results (loss or net profit) of the organization.

In all branches of the economy, operating expenses are distributed according to economic elements. These indicators have recently played a more important role in the work of organizations in a highly competitive environment, not only with foreign but also with domestic producers.

First, the modern market requires effective and adequate management of the organization. For success, enterprise managers must hire highly skilled management personnel. This requires more careful monitoring of the use of funds and careful analysis of the effectiveness of their use.

Secondly, the successful promotion of services and products on the market requires the company to significant marketing costs. Due to high competition, manufacturers are forced to conduct serious and expensive marketing research, spend considerable financial resources on advertising and carry out processing of goods before sale.

Thirdly, the innovative (that is, innovative) nature of the development of current enterprises requires the ability to get used to new conditions, to work confidently in the sphere of circulation.

How do you get information about operating expenses?

The most popular method of obtaining data on the state of operating expenses is the management accounting or the use of special software for financial management. After all, if the amount of expenses varies from year to year (especially towards their increase), then the interested parties (creditors and shareholders) will want explanations from the management. The availability of such information will help determine the reasons for the change in spending, which in the future will eliminate the problem of growing costs.