OPEX
The Cost of Doing Business
May 5, 2026
Welcome back to part nine of our series, 40 Accounting Terms Every Business Owner Should Know. In our last post, we looked at COGS—the fuel that moves your ship. Now, we’re looking at the ship itself: Operating Expenses, or OPEX.
If COGS is what you spend to make a sale, OPEX is the cost of keeping the lights on, the crew fed, and the harbor fees paid, whether you sail that day or not.
If COGS is what you spend to make a sale, OPEX is the cost of keeping the lights on, the crew fed, and the harbor fees paid, whether you sail that day or not.
What is OPEX?
Operating Expenses are the costs required to run your daily operations that aren't tied to a specific client project. These are your "Fixed Costs" or "Overhead."
Common OPEX Examples for Modern Businesses:
The Punchline: OPEX is what it costs to keep your business "alive" even on a day where you don't make a single sale.
Common OPEX Examples for Modern Businesses:
- Rent & Utilities: Your physical or virtual office presence.
- Salaries: Administrative staff or your own base "CEO pay" (not tied to billable project hours).
- Marketing & Advertising: What you pay to get the phone to ring in the first place.
- Tech Stack: Your QuickBooks Online, Gusto, or Dropbox subscriptions.
- Professional Fees: Your legal, tax, and Bookkeeping Services.
The Punchline: OPEX is what it costs to keep your business "alive" even on a day where you don't make a single sale.
OPEX vs. COGS: Why the Label Matters
Mixing these up is the #1 cause of "tangled books."
Categorizing these correctly on your P&L reveals your Operating Income. This is the metric that tells you if your core business model is actually sustainable before you even get to the complexities of taxes and interest.
- COGS should fluctuate. If sales go up, COGS goes up.
- OPEX should stay relatively stable.
Categorizing these correctly on your P&L reveals your Operating Income. This is the metric that tells you if your core business model is actually sustainable before you even get to the complexities of taxes and interest.
Avoiding "Expense Creep"
Because OPEX is often automated (think of all those $29/month subscriptions), it’s where "expense creep" happens. A few unmonitored subscriptions can quickly eat your entire profit margin.
At True North Bookkeeping, LLC, we help our clients audit their OPEX monthly. We ask the hard question: If you cut this expense tomorrow, would it stop you from serving your clients? If the answer is "No," we look at it as a prime candidate for cost-saving.
At True North Bookkeeping, LLC, we help our clients audit their OPEX monthly. We ask the hard question: If you cut this expense tomorrow, would it stop you from serving your clients? If the answer is "No," we look at it as a prime candidate for cost-saving.
How to Manage Your Overhead Like a CEO
- Review Monthly: Don't wait for tax season. Check your "Other Expenses" category every 30 days for surprises.
- Benchmark Your Spending: Are you spending 40% of your revenue on rent? That’s a signal to look for a more efficient remote setup.
- Invest in Efficiency: Sometimes, spending more on a great Gusto Payroll Management system (OPEX) saves you 10 hours of your own time. Your time is an asset—spend it wisely.
Next Up in the Series: We’re moving to the bottom of the P&L to talk about Depreciation. It’s the "invisible" expense that every business owner with equipment needs to understand.
#OPEXOptimization #StopExpenseCreep #TrueNorthFinancialClarity #OverheadAwareness #MasterYourPnL
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