Improve your bottom line with accurate time/cost reporting

Efficient OpEx and CapEx tracking solutions with Tempo

Determining a business’s health requires accurate bookkeeping practices that clearly outline when and where money is earned and spent. A company’s accounts reflect not only the enterprise’s success in selling its products and services but also whether the company uses funds efficiently and generates a strong return on investment (ROI). 

Tracking capital and operating expenditures is one of the best ways to evaluate a company’s spending habits. Looking for OpEx and CapEx management solutions? Tempo can help. When tracking operating and capital expenditures, software like Tempo’s can simplify the recording and reporting processes.

If you’re new to OpEx and CapEx tracking, we’ve supplied the basics required to take control of your company finances.

What are CapEx and OpEx?

CapEx and OpEx describe the costs and expenses incurred by a business during its operations.

Capital expenditures

Capital expenditures, or CapEx, are significant, long-term purchases designed to

• Grow the business

• Replace outdated equipment

• Increase the economic lifespan of an existing asset

These significant, often singular expenses typically require outside funding through debt, collateral, or equity financing.

Accountants consider CapEx fixed assets. Examples include the following:

• Property, plant, and equipment (PP&E)

• Building improvements

• Computers

• Corporate vehicles

Capital expenditures also include some types of intellectual property, such as patents, trademarks, and copyrights.

For financial reporting purposes, accountants record CapEx in the PP&E column on the balance sheet and under the investing activities section of the cash flow statement. The worth of a capital expenditure depreciates annually over its lifespan, reducing its value as an asset and impacting a company’s tax burden. Because payments for the item are spread over time, a CapEx purchase is deducted over numerous years.

Operating expenditures 

The day-to-day costs of running a business are considered operating expenditures, or OpEx. Here are some examples:

• Employee wages and salaries

• Legal fees

• Rent

• Utilities

• Supplies and materials

• Vehicle maintenance and gas

• Property taxes

• Travel costs

• Research and development activities

Accounting reports operating expenditures on the company’s income statement, which the organization deducts from taxes during the year they incur the expense. Unlike capital expenditures, OpEX purchases do not depreciate and lack long-term tax benefits.

Why is tracking CapEx and OpEx important?

Monitoring CapEx and OpEx isn’t only about regulatory compliance. It provides significant benefits to an organization. When a company starts tracking how and where it spends its money, your team gains insights into the following factors affecting operational efficiency:

Financial health

CapEx and OpEx offer different perspectives on a company’s finances. Tracking these expenditures allows the finance team to accurately plan and budget for long- and short-term spending. 

Operational efficiency

CapEx and OpEx spending are a company’s core measurements of operational effectiveness, providing insights into efficiency and production. By comparing spending to output, organizations can identify where to apply cost-cutting measures through process streamlining or automation. 

Strategic planning

CapEx and OpEx are helpful structures to align spending with the company’s long-term strategy and vision. In addition, comparing capital expenses to cash inflows gauges ROI, determining the success of a growth strategy. 

Accurate records

Categorizing agency, billable and nonbillable hours as either CapEx or OpEx expenditures streamlines record keeping, simplifying the accounting process at tax time. 

Tax liabilities

CapEx and OpEx impact a company’s tax burden in different ways. Knowing how and when to purchase a capital expense rather than an operational expense (e.g., buying an expensive piece of equipment outright instead of leasing it) can minimize liability over time.

Spending management

OpEx and CapEx tracking identifies when to shift costs between categories to stretch the company budget. Companies can redirect resources to enhance overall productivity and boost the bottom line.

Informed decision making

Tracking CapEx and OpEx provides vital data about spending patterns and resource utilization. Management can use that information to forecast future performance and make budget, resource allocation, and strategic planning decisions.  

Tracking CapEx vs. OpEx with Tempo

The project manager is responsible for categorizing and tracking costs. Some organizations invest in stand-alone OpEx and CapEx management software to facilitate administration. For users of – Tempo’s enterprise resource planning (ERP) software – the OpEx and CapEx management solution is integrated as the Tempo Accounts feature.

Leveraging Tempo Accounts allows project managers to organize time-tracking data across multiple Jira projects. The feature simplifies monitoring and categorizing hours spent according to project type, whether CapEx or OpEx.

As well as tracking time, Tempo Accounts allows project managers to:

• Track billable and non-billable hours per customer

• Monitor OpEx spending according to cost centers

• Draft CapEx hour reports for inclusion in tax credit applications

• Integrate with the solution to track and analyze CapEx and OpEx spending using project work logs

• Categorize time spent on project activities, such as development, marketing, or training

• Monitor sick days or planned time off

Analyze CapEx and OpEx performance

Alongside project management, companies use CapEx and OpEx data generated by an ERP for their financial analysis and reporting activities. This functionality, included in Tempo Timesheets, is typical of OpEx and CapEx management solutions.

The platform’s dashboard uses reports and visualizations to help users measure and compare spending data. This information allows the finance department to weigh actual expenditures against benchmarked values, budgets, and forecasts, indicating individual projects’ efficiency, profitability, and ROI. 

Optimize CapEx and OpEx decisions 

Finally, companies use ERP and project management software to inform OpEx and CapEx planning and decision-making, ensuring these expenses support the enterprise’s strategic goals. Reviewing this information can identify trends, opportunities, and risks. Management can objectively assess each scenario and possible alternatives to determine which options to prioritize for approval.

For example, using the data derived from Tempo Timesheets, the planning department can prioritize CapEx expenditures and projects based on their overall impact, likelihood of success, and urgency.    

Start tracking CapEx and OpEx with Tempo today

Finding the right balance between capital and operational expenditures enhances profitability and reduces tax burdens. Even better, tracking CapEx and OpEx helps you develop a strategic vision that improves productivity and efficiency. 

Don’t let data gather dust in your ERP. with management software like Tempo Timesheets and Financial Manager. These programs integrate with Atlassian’s Jira to surface financial health metrics for your projects so you can easily manage your company’s revenue and expenses.