Operating Expense
Day-to-day costs of running a business.
Operating expenses (OpEx) are the costs of running daily business operations, excluding COGS. They include rent, utilities, salaries, marketing, insurance, office supplies, and professional services. OpEx is fully deducted from revenue in the period incurred (unlike CapEx, which is capitalized and depreciated). Managing OpEx directly impacts operating income and net profitability.
Example
A digital agency has $45,000/month in operating expenses: $20,000 salaries, $5,000 rent, $8,000 software, $7,000 marketing, $3,000 utilities, and $2,000 insurance.
Why It Matters for Your Business
Operating expenses are the costs between gross profit and net profit, so controlling them is often the most direct lever for improving profitability.
Related Terms
More Business Terms
Accounts Reconciliation
Ensuring account balances match between different records.
Break-Even Point
The sales volume at which revenue equals costs.
Budget
A financial plan estimating income and expenses.
Financial Forecast
A prediction of future financial performance.
Capital Expenditure
Funds used to acquire or upgrade physical assets.
Related Financial Guides & Resources
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