finance
OpEx vs CapEx
Operating expenses (ongoing) vs Capital expenditures (long-lived assets). The accounting and tax distinction matters.
Definition
OpEx (Operating Expenses) are ongoing day-to-day costs - rent, payroll, marketing - that hit the P&L in the period they're incurred. CapEx (Capital Expenditures) are purchases of long-lived assets - equipment, real estate, software - that are capitalized on the balance sheet and depreciated over years. The distinction matters for tax (CapEx depreciation rules), cash flow (CapEx is a big cash hit upfront), and strategy (OpEx is flexible, CapEx is locked in). The OpEx-vs-CapEx choice often shows up in software: SaaS subscription (OpEx, flexible) vs on-premise license (CapEx, locked in).
In your business
- →Section 179 in the US lets you expense some CapEx immediately rather than depreciate - check eligibility with CPA
- →Prefer OpEx when you need flexibility, CapEx when you have predictable long-term need
- →Watch SaaS OpEx creep - small monthly subscriptions add up to large annual spend