Understanding Capex vs Opex and Facilities Management

Both CapEx and OpEx refer to expenses that facility managers encounter and that they need to track. Understanding the key differences between these types of expenditures can help you minimise your costs and maximise your efficiency. According to FM Link, one of the most challenging aspects of managing a facility is determining where expenditures fall and properly planning for events and expenses.

What is CapEx?

Capex is short for Capital Expenditure. You incur a capital expenditure when you purchase something that will benefit you for years to come – not just to fulfil an immediate need. Your capital expenditures will benefit you beyond the current tax year and could be anything from new equipment to upgrades to your facility or even new property purchases.

• Your physical building or facility
• The equipment and machinery you own
• Improvements to your building or facility
• Your computer and IT hardware (software, SaaS and other line items may fall under OpEx)
• Your fleet vehicles, including delivery trucks, equipment and other vehicles you own
• The HVAC that keeps your building comfortable year round

While many CapEx costs are for new items, they do not have to be. Roof repair, upgrading or updating older equipment and even renovations can be covered as CapEx costs. On your balance sheet or cash flow statement, your CapEx costs are in the investing activities section, since they are a long term asset or investment in your business. CapEx items may be externally financed and paid for over time, according to Investopedia. 

What is OpEx?

• Salaries paid to employees
• Legal, accounting and other fees
• Raw goods, inventory, packaging and more 
• Administrative costs
• Taxes on your property
• Your own or an employee’s business travel
• Smaller tech devices like tablets, phones and related items that cost money but don’t require long term financing

OpEx, or Operational Expenditure is money you need to spend to actually operate your facility on a daily basis. You incur operational expenses when you spend money to create a product, run production or provide services as part of your daily business routine. The consumables you need to buy to run your business, the things you need to purchase to manage day-to-day operations and other, similar expense all fall into this category.

A few common facilities management related operating expenses include:

CapEx vs. OpEx 

Capex expenses and Opex expenses are treated differently when it is time to account for your expenditures in your tax records. Because of this, it is essential to not only understand the differences between these two common expense items, but to accurately record them for your business and tax filings. In building management, CapEx expenses are those that improve the building for the long term — a new HVAC system that is more powerful and delivers better energy efficiency will give you a short term benefit (making it comfortable so you can operate) but is a capital expenditure, because HVAC systems last far longer than a single tax year. Ideally, something that is a CapEx expense will benefit your building, brand or organisation for a long period of time before it needs to be replaced. 

Get Help with CapEx and Opex 

Since both capital expenses and operational costs will draw money from your business — and have different rules and advantages — it is essential to properly categorise and detail your assets, costs and purchases. Opex consulting can help you reduce your overall operational costs, freeing up revenues that you can use to benefit your business in other ways; if you are not sure your operational expenditures are under control. We can help. Our unique approach to operational expenditures is designed to benefit your brand in several key ways, from discovering unneeded expenses you are paying to ensuring you are not being taxed at an increased amount do to a misallocation of costs. Capex consulting can save your business money every year; since large, longterm assets are very expensive, the right approach to them from the start is absolutely essential. Accidently overpaying on your taxes on a small item is not ideal, but it is also not a tragedy. Mis-assigning a capital expense or failing to account for it properly could cost you money for years to come. Capex consulting incorporates strategic planning into your purchasing, so you can take a proactive stance on some of the most important items your business or facility owns. Without expert assistance and proper facilities management consulting, you could end up overpaying for items or missing out on important tax breaks. 
Get in touch today for help with your building management CapEx and OpEx; we can help you assess and understand where you are now and come up with strategic plans for your future expenditures in both of these essential categories.