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Operating Costs (OpEx)
Also referred to as "Operating Expenses" or "OpEx".

The day-to-day expenses incurred in running a building or facility and all its physical assets, including:

Examples of Operating Costs:
Listed below are some typical examples of operating costs:
  • Photocopying and distribution of notices and minutes of meetings of the owners.
  • Premiums for insurance coverage for the building.
  • Gas consumption and electrical consumption for boilers and other equipment used to heat the building and the domestic water.
  • Vacuuming of the carpets and washing of the windows as part or a routine maintenance program.

Attributes of Operating Costs:
Operating costs generally have the following attributes:
  • The costs are frequently occurring (recurring costs) that is they occur once a year or more often (monthly, quarterly, etc).
  • The costs are relatively low when compared to capital costs. See: materiality.

Analysis of Operating Costs:
The following asset management concepts provide further insight into operating expenses:
Operating costs typically represent about 50% of the total cost of ownership (TCO) of a building.

Management of Operating Costs:
  • The individual operating costs are reflected as line items in the operating budget.
  • The budget is approved once a year.
  • The costs are subject to annual cash flow cycles.
Some of the complexities associated with classification, management and financing of small capital expenses are addressed through the following principles.
The relationship and interdependencies between CapEx, OpEx and TotEx
Fig. The relationship and interdependencies between CapEx, OpEx and TotEx.

Fig. Annual landscape maintenance is an example of an operating cost.

Fig. Window washing is an example of a typical annual operating cost

Fig. Meetings of the owners are a an operating expense.

See also:
Compare with:

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