{"id":271852,"date":"2023-12-20T12:01:02","date_gmt":"2023-12-20T00:01:02","guid":{"rendered":"https:\/\/www.reckon.com\/au\/?page_id=271852"},"modified":"2026-05-05T17:13:42","modified_gmt":"2026-05-05T05:13:42","slug":"operating-expenses","status":"publish","type":"glo","link":"https:\/\/www.reckon.com\/au\/glossary\/operating-expenses\/","title":{"rendered":"What is an operating expense?"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” da_disable_devices=”off|off|off” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Definition description” _builder_version=”4.27.6″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

Operating expenses (OpEx) are costs related to normal business operations. Operating expenses are essential for a business to run on a daily basis.<\/p>\n

Managing operating expenses<\/h2>\n

Part of owning a business is maximising profit while minimising operating costs. Managing operating expenses<\/a> involves striking a balance: if you cut costs too much, you could cut corners and compromise the quality of your goods and services, but if you leave costs unchecked, it could hamper your profitability.<\/p>\n

Fixed and variable costs<\/h3>\n

Operational expenses are divided into two departments: fixed costs and variable costs incurred.<\/p>\n

Examples<\/h4>\n\n\n\n\n\n\n\n\n\n\n
Fixed costs<\/th>\nVariable costs<\/th>\n<\/tr>\n
office supplies<\/td>\nraw materials<\/td>\n<\/tr>\n
rent<\/td>\ncost of labour<\/td>\n<\/tr>\n
insurance<\/td>\nsales commissions<\/td>\n<\/tr>\n
employee salaries<\/td>\ncredit card fees<\/td>\n<\/tr>\n
marketing expenses<\/td>\nfreight and shipping<\/td>\n<\/tr>\n
administrative expenses<\/td>\nutility costs<\/td>\n<\/tr>\n
property taxes<\/td>\n\u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Operating expense ratio<\/h3>\n

To calculate your operating expense ratio, add all your business’s operating expenses to your cost of goods sold (COGS<\/a>) and divide by your net sales.<\/p>\n

The lower your operating expense ratio, the more efficiently you manage business costs. A higher OER will provide you with an opportunity to find areas where you can reduce your costs to run a more efficient business operation.<\/p>\n

Non-operating expenses<\/h2>\n

Non-operating expenses are costs that have been incurred and don’t fit either operating expenses or capital expenses. These appear below operating expenses on the balance sheet. Some examples include:<\/p>\n