1. Operating expenses are generally known as the costs incurred by the business during its normal course of operations and in the day-to-day running of the business.
2. Some common examples include advertising, rent, utilities, salaries, and other necessary expenses. These costs are related to the core operations of the business and are not directly tied to production of revenue. They are also known as overhead costs.
3. Operating expenses are also recorded on the Profit and Loss statement, separate from the Cost of Sales. The Net Profit Before Tax of a business is calculated by subtracting the Operating Expenses from Gross Profit.
4. Operating Expenses are often overlooked by business owners. Any business need to recognize and manage this operating expenses in order to run smoothly and profitably. This is because a business’ operating expenses are mostly fixed costs that it incurs daily, whether it is generating sales or not.
5. When it comes to tax returns, some operating expenses are tax deductible that can reduce the business taxable income, while others are non-deductible. According to IRAS, tax deductible business expenses are those that was incurred wholly and exclusively in the production of income.
6. Please take note that personal expenses should not be counted and be included as part of the business expenses. Apart from being not tax deductible, it will not be showing the actual expenses incurred by the business.
7. Operating expenses are a critical component of a business overall financial health. You need to understand and manage it effectively in order to maintain/increase profitability, performance evaluation and budgeting. Being able to optimize your business operating expenses will go a long way in ensuring the business sustainability.
8. For expert accounting and support for your business, please come and talk to us. We at PL Biz Consulting Pte Ltd have the expertise and dedicated accountants to guide and assist you.
