Skip to main content

Microsoft Business Central Implementation: The Story So Far

What are Operating Expenses? (Explanation) - Ledger Bench

Operating expenses are incurred by businesses to keep the business going, includes staff wages, supplies not include manufacturing cost. Operating expenses does not include manufacturing cost or cost of goods sold (direct labor, material, manufacturing overhead) or capital expenditures (building or machinery) 


What is included in Operating expenses?


Following are included in operating expenses:



  • Insurance

  • Rent

  • Research

  • Utilities

  • License fees

  • Accounting fees

  • Office supplies

  • Attorney fees

  • Vehicle expenses

  • Travel expenses

  • Payroll for staff excluding labor for manufacturing 

  • Marketing including social media channels such as Facebook

  • Building maintenance and repairs

  • Property taxes on real estate


Operating expenses are reflected in the company's income statement.


What does an increase in operating expense mean?


An increase in operating expense would mean less profit for a business. Often operating expenses receive more scrutiny from a company, as these types of costs may be less fixed, and their non operating expenses, capital expenditure and manufacturing costs. 


A company’s area manager would try to reduce operating expenses by outsourcing a few areas of business or allowing some employees to work from home. This cuts down actual physical space used by the staff. Management may also try to implement money saving techniques such as automating parts of the business or reducing salaries for the new hire. 


You May Also Read - IRS Tax Relaxation Deadlines for Covid-19 (With State Regulations)


What is a non-operating expense?


A non-operating expense are the expenses that are not related to the company's day to day business operations or manufacturing. These include costs for:



  • Depreciation

  • Amortization

  • Bank fees including interest charges

  • Restructuring costs

  • Obsolete inventory including products that cannot be sold

  • Lawsuit payments and associated fees

  • Currency exchange fees


Are operating expenses included in COGS?


No, operating expenses and cost of goods sold (COGS) are shown separately on a company’s income statement. This is because COGS are directly related to the production of a product as opposed to daily operations. 


Looking for - Bookkeeping services for small business


Operating Expense Ratio:


The operating Expense Ratio (OER) is the cost to operate a piece of property compared to the income the property brings in. It is a very important ratio to use in real estate, such as with companies that rent out units. A low OER means that less money from income is spent on operating expenses. 


OER can also be used to gauge the difference in operating cost between two properties. 


For example, a company owns two plants in New Jersey, with similar outputs, and one’s OER is 12% more than the other, management must investigate the reason why this difference. 


Are Wages operating expenses?


Administrative expenses such as full-time staff salaries or hourly wages are considered operating expenses for a business. The cost of hiring a labor to produce a product is calculated separately under COGS and is not an operating expense.

Comments

Popular posts from this blog

Microsoft Business Central Implementation: The Story So Far

  Microsoft Dynamics 365 Business Central has proven itself since its initial launch as one of the finest Microsoft Business Solutions . ERP users easily recognize it in its previous avatar, which was of the NAV and though it retains all the key features of NAV including the same application code as well, Microsoft also offers the solution a cloud-based operable in the heart of Microsoft’s intelligent cloud. For those who have still not gotten a Microsoft Business Central Implementation done, given below is what they stand to gain after getting one done: Finance : BC (Business Central’s short form) connects data across sales, accounting, purchasing, stock and customer transactions to help businesses take better and wiser decisions. It has Power Bi dashboards that let the end user track financial performances in real-time and identify patterns and trends emerging in business through comprehensive reports and analysis. The solution helps improve forecasting through comprehensi

Benefits of taking Lead Auditor Certification in Quality, Safety and Environment.

Benefits of taking Lead Auditor Certification in Quality, Safety and Environment. There is a tremendous demand for Lead Auditor certified professionals. 1. Companies prefer Lead Auditors for Quality, Safety, and Environment jobs. 2. Salaries of Lead Auditors in Quality, Safety & Environment are more than other non-certified persons. 3. Certified Lead Auditor can join an auditing company as a Trainee Auditor and become Lead Auditor. 4. Working Engineers in Quality, Safety & Environment can get Senior Engineer positions. 5. Working Quality, Safety & Environment Engineers learn auditing techniques for performing Internal Audits and Sub-Contractors audits for all 3 management systems. 6. Major techniques for Conducting    a) Third Party Audits    b) Second Party Audits    c) Internal Audits are taught 7. Detailed knowledge of the ISO Standards is imparted for the following Systems          ISO 9001  QMS Quality          ISO 45001 OHSMS Safety          ISO 14001 EMS Environment

What is email marketing? How does it help business?

Email marketing has been around forever, and for good reason. It’s the most direct and effective way of connecting with your leads, nurturing them, and turning them into customers, consistently winning out over all other marketing channels. Email marketing is a digital marketing strategy based on sending emails and developing relationships with prospects and customers. An effective email marketing strategy convert prospects into customers, and turn first time buyers into recurring customers. One advantage of email marketing is that you can automate the entire process. Remember – You are a guest in their inbox People are inundated with interruptions, pitches, and advertisements everywhere they look. Though you might think your email is special, there’s a high probability that to the reader, it looks the same as the rest. This is why it’s important to remember where you are, and use your good manners as a result. Does email marketing still work? We know email marketing still works in ter