Investing in the right enterprise software is a crucial part of any successful business. In fact, with technological advances such as the cloud and SaaS, developing worldwide, not having the right software systems to keep up can be a make-or-break situation for your business.

When it comes to making the decision for which software purchase to choose there are so many factors to consider which ultimately take up a chunk of your time and resources. Then add on top of that trying to figure out which financial systems to use, and you have a recipe for disaster. To help speed up the process, we’ve put together a comparison list comparing Capital Expenses and Operating Expenses to help you make the wisest decision.

Definition of Capital Expenses and Operating Expenses

CapEx, otherwise known as Capital Expenses, are any investments spent on goods or assets. For example, property, infrastructure, equipment, even owned software licenses are all capital expenditures. The only thing with these CapEx investments is that you must keep them accounted for over their lifetime, usually 3 to 10 years, to reflect their current value.

Now OpEx, or Operation Expenses, have a completely different accounting system. When recording these expenses they will become a part of the company's profits and losses. This is simply because operating expenses are just what it takes to keep the business running.

Let's compare:

Purpose CapEx- Asset purchased with a life that goes beyond the current fiscal year.

OpEx- An ongoing cost.

Cost CapEx- One lump sum.

OpEx- Monthly or annually.

When Capex- Accounted for over 3 to 10 years.

OpEx- Accounted for in the current month or year.

Titled CapEx- Equipment, property asset.

OpEx- Operating cost.

Taxes CapEx- As the asset depreciates it is deducted over time.

OpEx- Just deducted in the current year.

Examples

CapEx- Purchasing a license to a software.

OpEx- Buying a desk to set up your workstation on.

Conclusion

Both CapEx and OpEx have their benefits but in recent years, the growing difficult economic times have put stress on businesses and many have started to opt for freezing capital expenses and converting them to operating expenses. Aside from the financial reasons for prioritizing operating costs, the ever-changing technology systems of new hardware or innovative SaaS also play a huge impact on not wanting to be tied down to one asset for years when the next better option is just around the corner. 

Therefore, moving to invest in flexible systems can be the best way to optimize your business. Operating expenses can eliminate the stress of system failures, and will put less stress on your accounting team trying to balance out the annual costs. Altogether, in this day in age, it is the most efficient way to grow your business by letting your team focus on doing what they do best.

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