The ongoing costs incurred by a business in its day-to-day operations, including rent, salaries, utilities, marketing, and administrative expenses.
Operating expenses are the costs required to run the business on a daily basis. They are fully expensed on the income statement in the period incurred (unlike CapEx which is capitalized). OpEx includes: employee salaries and benefits, office rent and utilities, marketing and advertising, insurance premiums, software subscriptions, travel expenses, office supplies, and professional fees. Controlling OpEx is critical for profitability — the operating expense ratio (OpEx ÷ Revenue) shows how efficiently a business converts revenue to profit.
A company's monthly OpEx: Salaries ₹20,00,000 + Rent ₹3,00,000 + Marketing ₹5,00,000 + Utilities ₹50,000 + Software ₹1,00,000 + Insurance ₹30,000 + Misc ₹1,20,000 = Total OpEx ₹31,00,000 against Revenue of ₹50,00,000. OpEx ratio = 62%.
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
COGS: direct costs of producing goods (raw materials, direct labor, manufacturing overhead). OpEx: indirect costs of running the business (rent, admin salaries, marketing, utilities). COGS appears above gross profit; OpEx appears below gross profit on the income statement.
Common strategies: renegotiate vendor contracts, switch to cloud SaaS (reduces IT infrastructure costs), automate repetitive processes, optimize headcount, reduce office space (remote work), consolidate software tools, and implement energy-efficient practices.
Funds spent by a business to acquire, upgrade, or maintain long-term physical assets such as property, equipment, or technology infrastructure.
A financial statement that summarizes a company's revenues, costs, and expenses over a specific period to show net profit or loss.
Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of a company's operating profitability excluding non-operating and non-cash expenses.
The point at which a business's total revenue equals total costs, resulting in neither profit nor loss.
Let Laabam.One handle the complexity. From invoicing to GST filing, our ERP software makes accounting effortless.