OPEX X CAPEX: Which is ideal for industry 4.0?

The rise of technological innovations changes routines and the operation of companies, with transformations related to products, processes and people. In addition, it is necessary to consider the economic scenario in the country and in the world, which requires special attention to avoid damages that put profitability and business maintenance at risk.

In this text, we will show the applications of the Opex and Capex concepts, considering the 4.0 Industry era. Read and find out the best way for finance in your organization.

Opex and Capex

Opex and Capex are acronyms that mean Operational Expenditure and Capital Expenditure – and they are widely used when planning an organizations finances.

Capex is an expense related to investments and acquisitions of capital goods, while Opex focuses on the expenses and costs of maintenance of equipment and resources related to activities and services of the company.

The purchase of a printer to print catalogs, for example, is Capex. The hiring of a printer to print these materials is Opex. In the first case, the payment is made at the time of purchase and the tax discounts occur from the depreciation of the asset, while in the second the expenses occur only when there is need for service and the tax deduction occurs in the current year.

Opex and Capex in Industry 4.0

In view of the rapid technological advance – a characteristic inherent to Industry 4.0, which has already reached its second wave – Opex has taken on a leading role in organizations. And there are good arguments in favor of that.

The rhythm of discoveries and technological innovations that make outdated technologies faster, as well as the possibility of outsourcing services and reducing burdens, make Opex offer an excellent cost-benefit ratio for business.

Thus, instead of employing a high investment in the acquisition of computers, for example, it is possible to rent the equipment. Besides the capital savings, the company:

• doesn’t have to worry about maintenance, which is already included in the rent;
• avoids depreciation, since every product or equipment loses value as soon as it leaves the store;
• can more easily replace the equipment with more modern ones whenever necessary – you can even change the supplier at the end of the contract;
• does not need to decapitalize, keeping the cash on hand or using it for whatever it thinks is most interesting.

We must not forget, however, that Capex expenses are incorporated as assets in the company’s balance sheet. These tangible assets are responsible for demonstrating the asset value of the organization, making it more valuable in the market.

Other examples of the replacement of Capex by Opex are:

• renting a commercial property (Opex), instead of buying it; 
• signing applications using the software as a service model (SaaS), instead of the final acquisition (Capex).

In the next topic, learn more about these two perspectives, their advantages and disadvantages, in view of the current phase of the world industry and how they should be analyzed to generate benefits to the activities.

Capex and Opex: what is ideal in Industry 4.0?

To start answering that question, check out the main advantages and disadvantages of Opex and Capex:

• Advantages – Opex: it is easier to approve expenditures (which is usually lower when compared to the other modality); greater flexibility of costs, without resorting to decapitalization; deduction in the taxation of the current year;
• Disadvantages – Opex: values are understood as expenses (and not investments); there is the possibility of high costs in the long term;
• Advantages – Capex: value spent is understood as investment; it gives long term return; it increases the assets cash flow;
• Disadvantages – Capex: high costs in the short term; greater difficulty in approving expenditures, usually higher in Opex; depreciation of assets acquired.

Deciding whether to use Capex or Opex therefore depends on an assessment that identifies the best option for organizational results, and a careful study is essential to compare the costs of: manufacturing equipment, acquisition or provision of services, taxes, revenues and return on investment time for each option (Capex and Opex).

But, as we said, it is undeniable that Opex offers the agility and flexibility necessary for companies to remain competitive in a market that is constantly changing, making use of the most modern products and services and generating savings for the organization.

In fact, the current market moment has even gained its own name. It is the VUCA moment, an acronym that describes four resources very present in our daily lives: volatility, uncertainty, complexity and ambiguity – learn more by reading this Forbes article.

Having subsidies to define Capex and Opex will ensure the best benefits for your company. And, speaking of advantages, take the opportunity to know Soluparts differentials by reading this article about our value proposition.