Operating expenses

Operating expenses (OpEx) are the ongoing costs a business incurs to keep running that are not tied directly to producing any one sale — rent, utilities, administrative salaries, software subscriptions, insurance, office costs, and marketing. They are the overhead of being in business, paid whether or not a particular sale is made.

On the profit and loss statement they sit below gross profit: revenue minus cost of goods sold gives gross profit, and gross profit minus operating expenses gives operating profit. That ordering separates how profitably you make the product from how efficiently you run the company around it.

Operating expenses are where most owners actually have control month to month, so a clean, well-structured OpEx section is what makes the P&L a management tool rather than a tax artifact — you can see where money goes and what to adjust. That depends on a chart of accounts built for how the business actually operates.

Expenses scattered across overlapping accounts, personal spending mixed in, or direct costs misfiled as overhead all blur the picture — common cleanup corrections that, once fixed, make the operating section comparable period to period.

The line between them is direct vs. indirect. Cost of goods sold is the direct cost of what you sold — it rises and falls with sales. Operating expenses are indirect — you’d pay the rent and the admin salaries whether or not you made a sale this month. Drawing that line consistently is what makes gross margin and operating margin both mean something.