Operating costs

Operating costs, often referred to as “operational expenses”, are the ongoing expenses that a business incurs in order to maintain its day-to-day operations. Operating costs encompass a wide range of expenditures necessary for the regular functioning of a business. This includes costs associated with production, administration, sales and marketing, research and development, and other activities central to the core operations.

Categories of operating costs:

  1. Direct costs (variable costs): These are expenses directly tied to the production or provision of goods or services. They tend to vary with the level of production.
  2. Indirect costs (fixed costs): These are expenses that are not directly linked to the production of a specific product or service. They exist regardless of the level of production and are necessary for the general operation of the business. 
  3. Semi-variable costs: These costs have elements of both variable and fixed costs.

Operating costs are a crucial component in financial statements and performance metrics. They impact metrics like gross profit margin, operating profit margin, and net profit margin, which provide insights into a company’s profitability and efficiency.

Ready to grow your business?

Clever finance tips and the latest news

delivered to your inbox, every week

Join the 70,000+ businesses just like yours getting the Swoop newsletter.

Free. No spam. Opt out whenever you like.

We work with world class partners to help us support businesses with finance

close
Looks like you're in . Go to our site to find relevant products for your country. Go to Swoop No, stay on this page