At company operating expenses are among one of the most important points for a correct financial management control.
The lack of control over these expenses can cause serious problems, causing your company to end up, month after month, in the red, which can impact the closure of its doors in the future.
Of course, just the amount referring to a company's operating expenses is not enough to have a complete view of the financial health of your business.
There are several other metrics that need to be considered when carrying out this assessment, but there is no doubt that these expenses provide a very quick benchmark on your company's costs.
Operating expenses are not directly related to running your own business, so it is common for some entrepreneurs to think that they are not important.
However, they have a huge impact and here we will show you all about the company operating expensess, showing not only the list of what they are, but also how to calculate and other points.
Want to know everything about it? So let's go!
Operating expenses: What are they?
The first thing we're going to talk about here concerns operating expenses, after all, it's important to know them before listing them.
Operating expenses can be described as all those expenses that are essential for a company to function.
This type of expense is usually quite predictable, with the ultimate goal of maintaining the proper functioning of a company.
Therefore, this shows how important they are, contrary to what many entrepreneurs tend to think, as there is a risk of generating future financial problems.
These expenses are not directly related to the production of a company, however, they are related to everything that is considered necessary for it to keep running.
This means taxes and duties, employee salaries, general expenses with light, rent, internet and water, in addition to all office supplies.
In this way, you can see that even though what is purchased is not necessarily influencing production, these expenses make your business work properly.
The lack of control over these expenses, on the other hand, can end up having a negative effect, impacting your business.
A cash flow imbalance can cause very serious financial problems that even lead to the bankruptcy of a company.
Therefore, it is also necessary to always count on the help of an accounting firm that assists throughout this process in the proper way.
Operating expenses: What are the main types?
There are different types of operating expenses of a company, which is why it is essential to know what they are, because they help a lot in the largest financial organization.
The two main types of these expenses are:
- Fixed operating expenses: are all those that are present, monthly, always with the same value, without any modification;
- Variable operating expenses: are those expenses foreseen for certain times, and their value varies greatly according to each period.
In addition to these two divisions, there is the possibility of further subdividing operating expenses into: selling expenses, administrative expenses and specific expenses.
Below, you will see a little more about each of them:
- Commercial expenses: are all those that are directly related to the company's communication, such as expenses with marketing/advertising, with commissions, with gifts, with maintenance of the car fleet, with fuel, among others;
- Administrative expenses: in the case of administrative operating expenses, they are directly related to the salaries of employees and all the charges incurred by them, meal or food vouchers and transportation vouchers, various bills (such as electricity, water, rent and internet ), taxes and duties, among many others;
- Specific expenses: are all those expenses that each company has and that are not similar for each sector or category.
With all this information, it is easy to understand about operating expenses and what they mean for a company.
Operating expenses: How to calculate them?
More than understanding what the operating expenses of a company, it is also essential that you know how they are calculated.
For this to be possible, you need to know what your company's complete operating expenses are.
In addition, it is important to know how many times these revenues occur annually, whether they are per month, per quarter, per semester or annually.
The calculation of operating expenses, by the way, will depend a lot on you knowing their frequency per year.
What is needed before anything else is:
- You must identify what the operating expenses are: all expenses need to be considered at the time of calculation, including those that seem more insignificant, in addition to observing the period of each one of them, which will help a lot to obtain excellent results;
- You must divide operating expenses by category: the second tip on how to calculate expenses is to divide them by category. Thus, you need to categorize expenses such as benefits, employee salaries, taxes, and others. One way to categorize correctly is to use specialized software
It is important to bear in mind that there is no exact formula for calculating company operating expenses be accomplished.
However, it should be borne in mind that the sum of expenses must be done separately according to the category in which it falls.
As each company has expenses that are tailored to its needs, it is important to pay close attention and deeply understand the entire operation before putting it into practice.
Knowledge about your business is what will really make the difference to understand whether your company's operating expenses are high or low, as well as what can be done to improve them.
With the understanding of the calculation of operating expenses, it's time to answer one more question: where are they directly applied?
Operating expenses: Where to apply them in companies?
Operating expenses can be divided into fixed and variable, as previously mentioned, but it is important to specify well where each of them is inserted in the company.
In fact, making this identification is something quite simple, because after listing all the expenses, all that will have to be done is to identify where each one of them occurs monthly and which ones only occasionally.
Let us therefore list the operating expenses of a company.
The fixed expenses of a company are as follows:
- Employee wages and labor charges;
- Benefits;
- Insurance;
- Communication, which is the maintenance of a contract with a company for a fixed and closed period.
Variable expenses are as follows, and may change from month to month:
- Expenses with office supplies;
- Maintenance of equipment, such as elevator, car and computers, for example;
- Electricity bill;
- Water bill;
- Internet account;
- Telephone bill.
All these accounts are present monthly, it is true, however, their value varies every month, and may be more expensive or cheaper from one month to the next, depending on several factors.
How important is it to analyze a company's operating expenses?
After everything that has been shown here, it is easy to understand why this type of analysis is so fundamental.
Despite this, there are those who still have doubts about the real importance of analyzing all these expenses.
Could you tell?
The analysis of a company's operating expenses allows you to understand if they are really within the budget that your business has.
In this way, it becomes more difficult for them to generate problems by messing up the cash flow, which can generate serious financial losses, which impacts any company, without a doubt.
Therefore, it is important that you compare all these expenses annually, especially each of the categories, which will allow you to understand everything that is really happening in your business.
When you realize that the costs of this type of expense are too high, you can then make changes to cut them as much as possible and thus generate more profits for the company.
This is the case, for example, of reducing your internet plan and saving energy, which will allow you to save a large amount of resources monthly.
Conclusion
As you have seen, operating expenses are very important for any company and need to be carefully evaluated, thus avoiding possible problems in the future, such as financial losses.
In this text, you could see a little more about the company operating expensess, what they mean, the main list of them and how they are divided into groups or categories.
The best way to carry out a good analysis of these expenses and make use of them in favor of your company is by having a good accountant, who will do the calculations and follow up correctly.
