The Language of Operating Expenses
As we discussed in the “Business Acumen is Key” blog last month, one of the main components in developing business acumen is having a strong understanding of the language that may be used during discussions with your prospects and customers. In today’s blog, we’ll go over the language of operating budgets.
One of the key things you’re going to hear a lot about is Operating Expenses (sometimes called “Op Ex”). You should know everything there is to know about Operating Expenses so that you can lead a productive discussion. Operating expenses are required for the day-to-day functioning of a business and are comprised of things like wages, utilities, maintenance, repairs, and so forth. All of these categories are sometimes referred to as “Revenue Expenditures.”
In an income-producing property, the landlord faces typical Operating Expenses, such as utilities, housekeeping, repairs and maintenance, roads and grounds, security, and administrative. These are generally known as “Controllable Operating Expenses.” Two examples of “Uncontrollable Operating Expenses” are real estate taxes and insurance.
Two things to keep in mind about operating expenses: they appear on the income statement, and they are fully deducted in the accounting period in which they were incurred.
Tomorrow we’ll continue our exploration to the language of capital expenditures, so stay tuned!
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