What is OPEX? Your guide to operating expenses
Knowing your operating expenses (OPEX) inside and out is crucial for smart financial decisions and business planning. These ongoing costs directly impact your cash flow, profitability, and ability to scale operations efficiently.
This guide provides practical examples and covers different types of OPEX. We’ll also look at how enterprise performance management (EPM) tools can streamline your approach to managing and forecasting these essential business costs.
What are operating expenses (OPEX)?
OPEX or Operating expenses are the everyday costs of running your business, such as employee salaries and rent. These aren’t the costs directly tied to making your products or delivering your services, but they’re the essential expenses that keep your operations running smoothly.
Unlike purchasing equipment or property, operating expenses don’t create lasting assets for your company. They’re consumed during regular business activities and need to be paid for again in future periods to maintain operations.
From an accounting standpoint, operating expenses appear on your income statement below the gross profit line and are fully deductible in the year they’re incurred. Since these expenses are subtracted from revenue to calculate your operating income, they play a crucial role in determining your company’s operational efficiency and profitability.
Examples of operating expenses
Operating expenses cover a wide range of business costs that support day-to-day operations.
Common examples include:
- Salaries and wages
- Rent and utilities
- Software subscriptions
- Marketing campaigns
- Professional services such as legal fees, accounting services, and consulting
- Insurance premiums
- Office supplies
- Travel and entertainment
- Telecommunications
- Training and development
These expenses vary by industry and business model. A technology company might have substantial software licensing costs, while a manufacturing business could face higher utility and maintenance expenses.
Types of operating expenses (OPEX)
Understanding the different categories of operating expenses helps with budgeting and cost control strategies:
Fixed operating expenses remain constant regardless of business activity levels. Examples include rent, insurance premiums, and base salaries. These costs provide predictability for budgeting but can be challenging to reduce quickly during economic downturns.
Variable operating expenses fluctuate based on business volume or activity. Marketing spend, commission payments, and usage-based software costs fall into this category. While these expenses can scale with revenue, they require careful monitoring to maintain profitability.
Semi-variable expenses contain both fixed and variable components. Telecommunications costs often include a base monthly fee plus usage charges, while utility bills typically have connection fees plus consumption-based rates.
Discretionary expenses are optional costs that can be adjusted based on business priorities. Training programs, team events, and certain marketing activities are examples where spending can be modified without immediately impacting core operations.
Operating expenses vs Capital expenditures
OPEX and capital expenditures (CAPEX) are similar, but different. Operating expenses cover day-to-day costs that are fully deductible in the current period, whereas capital expenditures involve the purchase of long-term assets that are depreciated over a period of time.
| Aspect | OPEX | CAPEX |
|---|---|---|
| Tax treatment | Fully deductible in the current year | Depreciated over multiple years |
| Financial statement | Income statement expense | Balance sheet asset |
| Duration | Consumed within the accounting period | Benefits multiple years |
| Examples | Salaries, rent, utilities, software subscriptions | Equipment, buildings, vehicles, and major IT infrastructure |
| Cash flow impact | Regular, ongoing payments | Large upfront investment |
| Budget flexibility | More adjustable short-term | Harder to modify once committed |
Example: Let’s say a growing software company is deciding whether to buy or lease office space. Purchasing the building requires a large upfront investment (CAPEX) that gets depreciated over decades, while leasing creates monthly rental payments (OPEX) that are immediately deductible but don’t build equity.
Why operating expenses matter
Operating expenses represent the largest controllable cost category for most businesses, making effective OPEX management essential for financial success.
Understanding and controlling these costs provides several key advantages:
- Cash flow predictability and risk management: Operating expenses create ongoing financial commitments that must be balanced against revenue. Accurate OPEX forecasting helps maintain liquidity, prevents cash flow surprises, and allows for proactive adjustments to spending patterns.
- Performance tracking: Key metrics like operating margin and EBITDA rely on operating expense control. These ratios help investors and stakeholders evaluate operational efficiency and company performance.
- Strategic planning and scalability: OPEX forecasts form the foundation for budget planning, hiring decisions, and expansion opportunities. Understanding your operating expense structure also helps determine how costs will change as the business grows, supporting more informed scaling decisions.
- Competitive advantage: Organizations that optimize operating costs without compromising quality can offer better prices, invest more in innovation, or generate higher returns than competitors.
“Tracking OPEX is literally the backbone of what we do in the finance space. Knowing what your operating costs are allows us to prepare budgets, projections, and make strategic decisions on what investments to make on the capital expenditure side. Tracking OPEX also tells us when costs are creeping up, which are indicators that assumptions need to be re-assessed so that we can continue on the path of profitability.”
Kimberly DeCarrera, Fractional Chief Financial Officer (CFO) at Springboard Legal
Operating expenses and enterprise performance management (EPM) in 2025
Operating expenses are rising across industries as businesses adapt to new technologies and changing market demands. Organizations are experiencing a significant shift from traditional capital expenditures to subscription-based operational expenses, particularly in technology infrastructure. Cloud computing services, AI platforms, and software-as-a-service (SaaS) solutions are converting what were once large upfront investments into ongoing monthly costs.
Artificial intelligence is creating new categories of operating expenses, from AI model training costs to specialized talent acquisition and ongoing platform subscriptions. As one expert notes:
“AI is going to have a significant role in OPEX. If you’re a business that could evolve and improve your services by incorporating AI to keep up with your competitors, you’re going to see some significant cost increases in development and maintenance. If you aren’t going to incorporate AI into your business but will use AI to make what you do easier, then your subscription will increase as the language models become increasingly complex.”
Paul Cheetham, CEO, Lead Broker, and Certified Financial Planner at Vanla Group
This shift toward higher, more complex operating expenses makes effective management crucial. This is where enterprise performance management (EPM) tools play a key role. Modern EPM platforms enable organizations to integrate operational and financial data, providing real-time visibility into cost trends and automated forecasting.
How Jedox EPM platform handles OPEX
Jedox is a planning and performance management platform that makes it easy to manage operating expenses across your entire organization. With a look and feel similar to Excel, the platform adds powerful collaboration and automation features that eliminate the need to juggle dozens of spreadsheets across departments.
With JedoxAI supporting human oversight of OPEX, Finance teams can quickly identify anomalies, understand trends, and add predictive forecasting to scenario development. JedoxAI understands the context of your business and can provide intelligent options for business stakeholders who need to control the business with precision.
Here’s a quick peek at an OPEX dashboard configured within the Jedox platform:
With Jedox, you get:
- Real-time OPEX visibility: Monitor all your operating expenses through integrated dashboards that show budget vs. actual performance across departments and cost centers
- Single template planning: Create one planning template that handles hundreds of cost centers instead of managing separate spreadsheets for each department
- Automated workflow: Send personalized planning links directly to stakeholders via email, eliminating manual spreadsheet distribution
- Built-in approvals: Track submission and approval status with full audit trails of comments and decisions throughout the planning process
- JedoxAI: Detect spending patterns, forecast future OPEX with explainable AI, and adapt plans in real time as conditions change
What’s next?
Understanding and managing your operating expenses effectively is one of the most important things you can do for your business’s financial health. When you have a clear handle on these costs, you can make better decisions, improve your margins, and stay competitive.
Ready to dive deeper? See how Jedox handles OPEX or learn why traditional budgeting methods are failing modern CFOs.
What's the difference between OPEX and CAPEX?
OPEX covers day-to-day operational costs like salaries, rent, and utilities that are fully deductible in the current year. CAPEX involves purchasing long-term assets like equipment or buildings that are depreciated over multiple years and appear on your balance sheet.
How to calculate operating expenses?
Add up all your routine business costs, including employee wages, rent, utilities, insurance, marketing expenses, software subscriptions, and other day-to-day operational costs. These figures are typically found on your income statement below the gross profit line.
What are examples of operating expenses?
Common OPEX includes salaries and benefits, office rent, utilities, software subscriptions, marketing costs, professional services fees, insurance premiums, office supplies, telecommunications, and travel expenses.
Are operating expenses tax-deductible?
Yes, operating expenses are generally fully deductible in the year they're incurred, which makes them different from capital expenditures that must be depreciated over time. Always consult with a tax professional for specific situations.
How often should I review operating expenses?
Most businesses review OPEX monthly as part of regular financial reporting, with more detailed analysis during quarterly reviews and annual budgeting processes. Regular monitoring helps identify trends and opportunities for cost optimization.
