![]() Now you can look up average operating expense ratios for your industry to see how your business is doing in comparison. Then, divide by your revenue to get a percentage of revenue that you’re spending on these expenses-an operating expense ratio. To get an operating expense ratio (OER), add your cost of goods sold (COGS) to your operating expenses. Once you know your operating expenses, examine them within the context of your revenues. ![]() Obviously, now that you know what is and what isn’t an operating expense, it should be pretty easy to categorize your expenses, as long as you keep good records or use a software that helps with bookkeeping.īut, like all numbers in business, your operating expense total only makes sense within a larger context. Now that we know what is and what isn’t an operating expense, you’ll need to calculate your OpEx. These are usually the easiest to reduce to make a real impact on your bottom line.īut we’re getting ahead of ourselves. Plus, as we’ll discuss later, when you’re looking to save money in business, the best way to do so is to actually look at your operating expenses separately from other expenses. But there is a distinction in the way these costs are handled when you file your taxes, so it’s important to keep track of operating expenses separately. That doesn’t mean that these aren’t costs your business has to deal with-they absolutely are. Neither do capital expenditures like buildings or machinery. But there are some technicalities to be aware of, and a few expenses don’t fall under this umbrella.įirst of all, the cost of goods sold (including materials and manufacturing) does not qualify as an OpEx. Most of what automatically comes to mind as you think about the costs of running a business qualify as operating expenses. What is not included in operating expenses? If your business files taxes in the United States, you’ll want to track and document your OpEx because they are tax deductible! □ What WFH expenses should you look for when you’re managing your finances? We collaborated with Bench, an online bookkeeping service, to create this guide that’ll come in handy as you’re looking through your operating expenses. 5 tips to reduce your small business operating expenses.How do you calculate operating expenses?. ![]()
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