Operating Expenses

The Operating Expenses of a company is the total expenditure incurred as a reult of performing normal business operations. It includes, for example, the payment of employees' wages, funds allocated toward research and development, and depreciation but in general it does not include those costs which are directly related to production and sale of the goods or service produced. In short, this is the money the business spends in order to turn inventory into sales revenue.

While most businesses seek to minimise operating expenses, and run efficiently, there is the danger that too much cost cutting could lead to the quality of output being affected to the detrimanet of the business. During a recession it is usual for a business to cut costs by doing such things as staff redundancy, and short time working, and initially earnings can be boosted. However once the 'easy' cost reductions have been made, further cost cuting may do more harm than good.

Also known as 'OPEX'.

What to do if you need more help

If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.

We hope you found this information useful.

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