Definition of operational expenses

Expenses resulting from the operation of a company: payment of services, rent ...

Operational expenses are the money that a company or an organization must disburse for the development of the different activities that it deploys.. Among the most common we can cite the following: payment for the rent of the premises or the office in which is settled, payment of salaries to its employees and purchase of supplies, among main.

That is, in some way, operational expenses are those that a company will allocate to keep its status as a company active, or, failing that, to modify the inactive condition in case it is not, in order to be able to return to optimal working conditions.

These types of expenses, for example, are associated with the functioning normal of a company and are opposed to non-operational expenses that are those incurred by the business organization in an extraordinary way and they do not turn out to be frequent, as the operational ones that do they are.

Essential to determine the profitability of a business

On the other hand, they are considered as ordinary costs and with them the company intends to obtain various benefits that will help you develop your work in accordance and of course aspire to the achievement of your objectives. We already mentioned some and we could add the light for example, without it the connection to Internet and therefore unfeasible conducting business that this route allows today.

It is important to note that these expenses must be taken into account when determining the cost effectiveness of a company. A large expense in this regard could damage the finances of a business and complicate its sustainability.

The purpose of all businesses is profitability and, for that matter, the cost of operating expenses is key when it comes to achieving this objective. If the operational expenses that a company has are not low but rather high, then they should be considered in the strategies so that the objective is not harmed.

A trend of companies is to lower these expenses if they are high or always seek that are as low as possible so that this does not complicate your activity, or that increases must be transferred to the production to solve them.
The use of technology is a strategy common when it comes to reducing these types of expenses.

So any entrepreneurship or project should be carried out before starting a projection of this type of expenses in order to have a clear idea if the business is viable or not. Of course, this task must be faced by professionals with vast knowledge in this regard.

Type of operational expenses

Operational expenses are divided into four types: administrative expenses (salaries and those services of the office), financial expenses (payment of interest, issuance of checks), sunk expenses (They are those expenses that are made before the start of the operations corresponding to the activities) and representation expenses (They include travel expenses, mobility in them, for meals, among others).

Operating expenses are also often called indirect expenses, since as we indicated above, they correspond to the operation of the business, therefore, they do not turn out to be investments, such as the expense that is paid for the purchase of a machine, which does turn out to be an investment.

Then, An investment is the placement of capital that is made with the aim of achieving a future profitIn other words, when you invest, you are resigning an immediate benefit to a future one.

And this is where the main difference between investment and operational expenses lies, since the latter are absolutely intended for the operation of the business in question and they are not materialized in anticipation of a future benefit, but the mission is to facilitate the survival of the business.

The purchase of a photocopier is an investment for a company, while the sheets that are purchased to capture the photocopies, the maintenance and all that it requires to maintain its operation are operational expenses.

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