How You Spend Your Business’ Money Matters

Your decisions with capital will bleed into every part of your organization, so it’s crucial that you are able to determine the difference between capital expenses and operational expenses. When you know what each of these accomplish, you can do more with the same amount of capital.

The Real Difference Between Capital Expenses and Operational Expenses

Capital expenses are one-time purchases that you make, and they are usually with larger sums of money. You might use them to purchase a solution up-front rather than finance it, like with servers, workstations, etc. The logic here is that if you spend more now, you spend less in the long run.

Operational expenses take the opposite approach. They look at recurring expenses that your company uses to keep itself running, typically on a monthly or quarterly basis. Understanding operational expenses makes for more predictable budgeting rather than unpredictable and costly up-front costs. After all, small, monthly payments are easier to manage than larger payments at a single time, right?

What Are the Benefits of Capital Expenses?

The benefits of capital expenses, particularly for IT strategy, come down to the timing of the purchase and the amount of power you’re trying to get all at a time. Capital expenses are going to be most effective when you are adding considerable power to your infrastructure, whether it’s improving your on-site network or moving to a cloud-based model. Businesses purchase the equipment, then do what they will with it, leading to a fair amount of freedom on the manager’s part. Businesses that anticipate a decrease in IT budget might also consider investing now while the funds are available.

What Are the Benefits of Operational Expenses?

On the other hand, operational expenses are more ideal for organizations that are not able to project so far into the future or have limited funds available at a given time. Operational expenses are becoming more and more accessible, too, in the form of “as a service” offerings for cloud computing, managed IT services, hardware leasing, and so on. Businesses using operational expenses as the basis of their budgeting needs can leverage modern solutions at a lesser up-front cost, and changes can be made more efficiently compared to the large investments and amount of planning needed for capital expenditures.

If you would like to know how managed IT services can fit into your budget, look no further than Directive. Our trusted technicians can guide you through the process of looking at your own IT budget and how you want to prepare for acquiring new technology solutions. Whether you want to purchase solutions outright or you want to make the more economical decision to go with operational solutions, we’ve got you covered. Just reach out to us at 607.433.2200 to learn more.