CAPEX/OPEX from Project's Manager point of view

OPEX and CAPEX are accounting terms yet it may be useful for Project Manager to know something more about them. It is common that clients require that your project delivers them as much CAPEX as possible (while lowering OPEX). What does it mean?

Czas czytania: 2min
Rok publikacji: 2008

Few excerpts from wikipedia:

Capital expenditures (CAPEX or capex) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year. Capex are used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings.

An operating expense, operating expenditure, operational expense, operational expenditure or OPEX is an on-going cost for running a product, business, or system. Its counterpart, a capital expenditure (CAPEX), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a photocopier is the CAPEX, and the annual paper and toner cost is the OPEX. For larger systems like businesses, OPEX may also include the cost of workers and facility expenses such as rent and utilities.

Im my company Project Managers take part in writing offers or contracts. Many clients insist that offers or contracts delivers that could accountet as CAPEX. How to write it that way? For example you should write that you deliver a documentation rather them writing that you deliver an analysis (which results in documentation). You should deliver changes in system configuration rather then “configuring system service”. So it is up to you to try to satisfy your client’s Accountant Department.

There is a thing you should remember - while changing your project’s description you should always keep in mind not to change it too much that it could influence your project’s scope. In other words - your scope should be fixed in such document and it must be interpreted in one way (the right way of course :) by everyone who reads it.

Also you should make sure that your client understands your intensions. For example if you write that you deliver a documentation make sure that clients does not get impression that such documentation is not going to based on your team’s hard working analysis. Some clients might think that you deliberately want to mislead them by not offering them your real work effort. Such OPEX->CAPEX offer changes should be accepted by your client. I hope you got the idea.

Do you have any comments on that?

If you are interested in more details here are some links:

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