The Great Debate: Capex vs. Opex

Capex or capital expenditure are those paid up front as a long term investment that will provide future benefits such as purchasing a heavy duty printer while opex or operating expenditure are those incurred on a monthly basis in the course of ordinary business such as going to print your documents.

Which Option to Choose For Your Growing Business?

When choosing this it should be based on a better understanding on the role of capital expenditure within your company. Many organizations and companies can be limited by the markets or private lenders in the amount of capital expenditure that they are able to access. In this case you will see that many companies and organizations usually direct their investments towards revenue generating activities. They prefer to lease rather than purchase. Companies can use operating expenditure (opex) to fund their needs giving them plenty of budget flexibility. Going the opex way seems to be a better route. It helps companies to respond to faster product cycles. Customer demands can be met almost simultaneously because analytic resources for products and customer analysis can grow business demands .It enables resource utilization.

Capex and Opex Can Affect Your Company or Business

Choosing between carpex and opex is about cash flow. In the pursuit of maintaining a balanced sheet, with optimum cash flow boards are pairing back on capital expenditure (capex) opting wherever possible to fund projects from operating expenditure (opex) instead. One of the reason for this is the rapid changes in technology. If you have to buy a server for instance you have to understand the fact that technology keeps on changing and advancing. With a managed server you can get to change it at any time. You can choose form a managed hosting site like Single Hop. You can choose to either pay huge amounts of money from a server that will probably not work for very many years or alternatively you can make a smaller and cheaper monthly payment. All additional costs you will incur if you buy storage utilities IT staff etc. For example if you are buying a laser printer which means you will have to make a lump sum capital expenditure for the printer that will probably last for more than a year. So even if the cash expense for it will be long gone the company won’t be able to expense that full cost for the year and with this you will find asking yourself some questions such as: How vital is the new printer?, what if the money we spent on this particular printer we could have spent it on something else?

Capex as Long Term Investment and Opex as Pay as You Go

Capex purpose to buy assets with a youthful life behold current year. It’s listed as property or equipment depreciation and when paid in lump sum (or financed with extra charges). Operating Expenditure (opex) its ongoing costs to run your business or company, paid monthly, accounted for in the current month or year and listed as operational cost.