The terms CAPEX and OPEX regularly come up during the conversations we have with our customers in relation to telecom network equipment purchases and asset recovery services. Here we provide a convenient guide to CAPEX and OPEX, explaining what they are, the difference between CAPEX and OPEX, how they affect accounting, and the ways that working with TXO Systems can help you to reduce both.
What is CAPEX?
The basic principle of CAPEX (or capital expenditure) can be defined as the funds that a business uses to purchase physical goods or services to expand the organisation’s ability to generate profits in the future.
In the telecoms network industry examples of CAPEX could include hardware (such as line cards, optical transmission equipment, routers, switches and servers), and services (such as telecom network de-installation and decommission, recycling and so on).
CAPEX is recorded as an asset in the balance sheet and it is expensed using depreciation to spread the cost of the asset over its designated useful life (usually a number of years) as determined by tax regulations.
What is OPEX?
OPEX (or operational expenditure) on the other hand, can be defined as the ongoing costs a company pays to run day-to-day and keep the business operational. Examples of operating expenses include power consumption and research & development (R&D) costs.
The OPEX costs of keeping fixed or mobile telecom infrastructure running 24/7 can be eye-wateringly high as networking equipment uses a lot of energy and a huge proportion of budget to run, upkeep and repair as it ages. The problem is worse when you consider the quantity of spares, surplus and redundant equipment being housed in expensive sites and potentially depreciating in value.
In contrast to capital expenditure, operating expenses show up on the profit and loss account and relate to expenses incurred on an ongoing basis. OPEX is fully tax-deductible in the year the expenditure is made as this cost is immediately consumed. This means that OPEX can be subtracted from the revenue when calculating the profit/loss of the organisation.
How to reduce CAPEX and OPEX
TXO Systems has been helping customers increase profits, decrease expenses and mitigate risk since 2005. We pride ourselves on taking the time necessary to understand our customers’ requirements and align ourselves to meet their needs.
- Purchasing secondary market telecom equipment from TXO is a smart way to reduce CAPEX and make your budget go further. Our equipment typically costs between 60–90% less than OEM list price depending on the series and manufacturer of the product, as well as the available supply.
- Through our acclaimed asset recovery solutions, you can get greater visibility of the stock you already own across multiple warehouse locations (so you can avoid placing orders for products that you already have in stock).
- In addition to converting your telecom network assets into re-usable inventory for your own purposes, TXO can actively remarket your products to accelerate sales and generate cash or credit towards your next purchase and boost your CAPEX budget even further.
- Do you know how much obsolete stock is being stored in your facilities? Many companies make the mistake of sitting on inventory to avoid showing a large write off in their quarterly reports. But once your inventory reaches the obsolete stage of its life cycle and there is no longer a market for that equipment, it’s too late to take actions that will result in the most profitable return on that investment. Partnering with TXO can help you maximise the residual value of your excess stock and reduce OPEX by eliminating the warehousing costs of obsolete inventory so you can utilise that warehouse space for productive and profitable purposes.
See the many benefits of our CAPEX and OPEX saving solutions for yourself