Capital Expenditures (CAPEX) and Operational Expenditures (OPEX) are two types of expenditure organizations make to generate revenue. It’s important for business owners to understand the differences between the two, as each implements different strategies to reach their goals.

Capital Expenditure is when a company spends money to purchase or upgrade assets that will provide some form of revenue in the future — such as purchasing a new computer system or renovating a factory. The cost can be spread out over several accounting periods and its value is often determined by the depreciation of the asset.

Operational Expenditure, on the other hand, is when an organization invests in ongoing activities that maintain current operations. Examples of OPEX include buying office supplies, employee salaries and benefits, professional services fees, and marketing campaigns. These costs are short-term and typically incur within a single accounting period.