Expenses are akin to Revenue in terms of visibility in reporting. They are often the most reported and analyzed KPI category. Expenses represent monetary value incurred towards an activity directly related to primary business function of the organization.
Expenses are largely classified into two based on impact that particular expense has on the organizations business. If the impact is related to day to day tasks and generating revenue (e.g. Travel, Shipping, Salary etc), it is an Operational Expense and strategic impact (e.g. New Office, Machinery etc) is classified as Capital Expense.
Expenses are usually reported as part of Profit & Loss statement and are broken down into different categories based on legal provisions and industry practices. There is a unique scenario where Expenses can be an Asset too. This sounds like oxymoron, but there are scenarios where accounting rules dictate in such fashion.
Examples of some KPI’s are
- Total OPEX: Day to day Expenses incurred towards Operating activities.
- Total CAPEX: Capital Expenditure for the organization incurred in a said timeframe.
- Sales & Marketing Expense: Expenses towards operational activities for Sales and Marketing function alone.
- Payroll: Total expense towards payroll & benefits of employees
- Insurance Expense: Premium paid for a policy of protection of an Asset. This is an example of Expense being an Asset