Operating expenses. What it is?

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

Operating expenses are those expenses thatare connected with management of the enterprise and its activity on realization of the goods and production; this is the cost of running a business, which includes any costs associated with the immediate operation of the company. They systematize 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 for some economic elements:

- labor costs;
- depreciation is the difference that arises inIf such assets as production equipment or vehicles are gradually deteriorating, 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, the cost of purchasing the necessary raw materials, the costs of research and scientific activities.

It is worth noting that, in addition to operating rooms, there is alsocapital expenditures (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 andoperating expenses? This is due to the fact that any investors and the management of the company 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 - it's pay, purchase of office supplies, and capital - the purchase of premises.

Analytical accounting of operational expensesany institution or enterprise is organized, taking into account the nature of the activity, the particular 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 expensesare distributed among economic elements. These indicators have recently played a more important role in the work of organizations in the face of tough competition, not only with foreign but also with domestic producers.

First, the modern market requires effectiveand 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 goodsOn the market, the company requires significant sales 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 selling.

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 way to get information aboutthe 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), 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.