Operating Expense

What is an operating expense?

Operating expenses (often called OPEX) are the ongoing costs of running your business. Unlike costs directly tied to specific jobs, operating expenses are incurred whether you complete one project or twenty. They're the price of keeping your business open and operational.

Common operating expenses

For small businesses, typical operating expenses include:

• Rent — Office, shop, or storage space
• Utilities — Electric, gas, water, internet, phone
• Insurance — Liability, property, vehicle coverage
• Software subscriptions — Accounting, invoicing, project management tools
• Office supplies — Paper, printer ink, general supplies
• Marketing — Advertising, website, business cards
• Professional fees — Accountant, lawyer, bookkeeper

Operating expenses vs. COGS

Operating expenses are general business costs. Cost of goods sold (COGS) are costs directly tied to specific jobs. A plumber's pipe fittings are COGS; their accounting software is an operating expense. The distinction matters for calculating gross profit versus net profit.