Our team can help you set appointments, pre-qualify leads, and collect payments on your behalf so you can focus on the most important and profitable aspects of your business. This can reduce payroll costs - and, by extension, operating expenses - for a business needing temporary or seasonal help with their operations.Īdditionally, outsourcing can help to supplement revenue, such as outsourcing virtual receptionists like we offer at Smith.ai. Anything from copywriting to bookkeeping to B2B sales can be taken on by short-term experts. It has never been easier for businesses to hire qualified workers on a per-project or freelance basis. Reducing operating expenses is one of the most effective ways for a business to improve its bottom line without directly affecting its product or service. The formula is expressed as:īoth of these figures can be used to get a good understanding of the financial status of a company and how it measures up to similar businesses in the same industry. Operating margin uses EBIT to determine how a business is performing financially compared to previous quarters and competitors. Operating Income (EBIT) = Gross Profit - Operating Expenses Operating income, or earnings before interest and taxes (EBIT), is another helpful formula that uses operating expenses to determine the cash flow from key areas of a business. Calculate operating income (EBIT) and operating margin

Operating costs is another way of assessing how a business is doing financially, and is used to see if there are any savings or budget cuts that can be made to maximize profits. Operating Costs = Cost of Goods Sold (COGS) + Operating Expenses Operating costs give a larger picture of a company’s day-to-day expenses by adding together operating expenses and cost of goods sold. Once you’ve found an accurate operating expense figure, you can use it in conjunction with a few other numbers to learn more about how your business is performing. There may be other company-specific figures not found on our list of operating expenses, so tracking your business costs is important for staying on top of the financial health of your organization. Common OpEx figures that can be found on a balance sheet include: Operating expense examplesĪs we’ve touched on, operating expenses are the costs to keep a business running, not including cost of goods sold. However, OpEx and COGS will combine in other important figures, which we’ll explain later.

OpEx is an essential aspect of a company’s financial statements, and understanding this accounting concept will give business owners insight into how operational costs are affecting profitability.Īn important note: Since OpEx does not include costs tied to the production of a product or service, cost of goods sold (COGS) is not included. Costs such as advertising, rent, utilities, and payroll would fall into this category. Operating expenses, sometimes referred to as OpEx, are all of the costs to keep a business running that aren’t directly tied to the production of a product or service.

Calculate operating expenses formula