Home / Operational Expenditure (OpEx)

An operational expense (Opex) is an expense a business incurs through day-to-day operations. Opex covers things like salaries and wages, taxes, rent, utilities, business travel, research and development, sales, administrative costs, advertising costs, insurance, office supplies, building and grounds maintenance, legal fees, etc. The general rule of thumb is that Opex is for short-term purchases that are used up in the year they were purchased. Opex expenses are fully tax deductible in the year they are incurred, whereas Capex must be depreciated and amortized over a period of years.

While operating expenses are unavoidable, many companies work hard to reduce these kinds of costs to increase their earnings and improve investor perceptions. However, an overly aggressive emphasis on driving down Opex over a period of time can lead to degraded product quality, customer retention and acquisition problems, and loss of top employees, all of which can eventually erode the overall brand perception of the company in the market place.

The most successful companies recognize the need for the right balance, and invest in the operational costs that will support business growth and brand loyalty such as customer care, product R&D, salaries and wages for top performers, sales incentives, and advertising.