While OPEX costs are related to your regular business operations or dispensable goods (e.g. Whether it’s purchasing a building to use as an office or upgrading your equipment, these kinds of costs are considered capital expenditures (CAPEX). Your operating expenses do not include the costs of acquiring or investing in assets. Categories included in OPEX include facilities costs (rent, utilities, any on-site perks), marketing and sales costs, business insurance, administrative costs (legal fees, finance help), and headcount costs (salary, benefits, etc) for those employees who are not associated with goods/services creation and delivery. Your operating expenses (OPEX) reflect these indirect, overhead costs of doing business. On top of that, the books need to be kept, the phones need to be answered, the taxes need to be paid. The product needs to be marketed so that people want to buy it, and prospective buyers need their questions answered and their options explained. The workers creating your product or service need somewhere to work. But as you know, a lot more goes into running a business than just creating a thing and selling it. Operating Expenses: Running Your BusinessĬOGS reflects the direct costs of creating and delivering your product – which is the reason you have a business in the first place. AWS hosting costs for app and service content.Rates paid to video production agency that filmed and edited the pre-recorded lesson videos.

Consulting fees paid to the teachers who participated in the pre-recorded lessons.Hourly rates paid to the on-demand tutors.Premium subscribers also receive a number of hours with an on-demand video tutor to give one-on-one guidance. For a monthly subscription fee, customers can access pre-recorded lessons from certified teachers on a variety of subjects through the Sample Learning app. Sample Learning is an education-tech company that offers online learning tools. Shipping costs for fulfilling its online ordersĮxample: COGS for a Company That Sells Services.Flour, sugar, eggs, butter, and various other baking ingredients.In addition to its retail location, Sample Bread also sells boxes of cookies online through its website, which it then ships to customers. Sample Bread is a bakery that sells daily selections of breads, pastries, cookies, and other baked goods. Example: COGS for a Company That Sells Physical Products If you offer digital services like SaaS, your COGS might include things like web hosting. If your company offers in-person services like coaching, your COGS/COR/COS might include things like the cost of paying your employees during the time they perform the service.

The principle remains the same, however: if the cost is incurred by rendering your service to customers, it’s included here.

They might include things like the cost of raw materials that go into the product, the cost of manufacturing labor to assemble the product, and the cost of shipping the product to your customer.įor service businesses, COGS (or more accurately COR/COS) is less obvious – after all, you don’t have raw materials or manufacturing costs. If your business sells a physical product, your COGS are fairly straightforward to identify. It doesn’t include indirect or overhead costs like marketing, or rent for your facilities. This includes everything that goes into actually making the product and delivering it to your customers. COGS: Creating Your ProductĬost of Goods Sold (COGS), sometimes called Cost of Revenue (COR) or Cost of Sales (COS) in businesses that provide services rather than physical goods, covers the money your business spends creating and delivering its product or service. While they both constitute money your business is spending, they include different kinds of costs, and give you different information about the health of your business. The short answer is that no, COGS and OPEX are not the same thing.

A common question we get from our CFO services clients is, how are Cost of Goods Sold (“COGS”) different from Operating Expenses (“OPEX”)? They’re both about spending money to allow your business to function are they just two terms for the same thing? Which is which, and why does it matter?

Cost of revenue vs cogs