Monthly Update July 2016
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Accounting <strong>Update</strong><br />
Janet Roberson, c.f.o<br />
MONTHLY UPDATE: JULY <strong>2016</strong><br />
CapEx vs. OpEx: The Mystery Explained<br />
I’ve often been asked to explain the difference between a capital expenditure (CapEx) and an operating<br />
expenditure (OpEx) so I thought it might be helpful to provide a few guidelines.<br />
The truth is the lines between capital spending and operating expenses can get blurred at times. There are definitely gray<br />
areas requiring a judgement call from Accounting and we are always happy to assist. However here are a few basics I<br />
hope will provide a general understanding.<br />
Definition<br />
Also known as<br />
CapEx<br />
Creates future benefits with a useful life of<br />
more than 1 year.<br />
Capital Expenditure, Capital Expense<br />
OpEx<br />
Expenses incurred in the course of ordinary<br />
business, which get used immediately or<br />
within a year.<br />
Operating Expense, Operating Expenditure,<br />
Period Expense<br />
Accounting treatment<br />
Expensed over the life of the asset in<br />
monthly increments called depreciation.<br />
Fully deducted in the month they were<br />
incurred or during the same fiscal year.<br />
Examples<br />
Buying machinery & equipment. New<br />
flooring in a building we lease (leasehold<br />
improvement).<br />
Maintence on equipment. Rent on a<br />
building. Repair to a floor.<br />
Limit (per our policy) $5,000 and over No limit<br />
Which is preferred?...<br />
We prefer OpEx to CapEx, which may seem counterintuitive to many of you. Why wouldn’t we prefer to take an<br />
expense out over a longer period of time instead of all at once? The answer is income tax. The more we expense during<br />
the year the less tax we have to pay at the end of the year.<br />
I.T. <strong>Update</strong><br />
Ben Erickson, v.p. information technolog y<br />
We’re in the home stretch on the branch conversion project. The next few weeks are critical for both user training<br />
and data preparation, and we will have our Syspro consultant on site for three of the next five weeks helping to<br />
guide us through the remainder of the project. During the weekend of the consolidation, Syspro services will<br />
be unavailable (<strong>July</strong> 29th – August 1st); however, customers will still be able to log onto the website and view<br />
their orders and current inventory. After the completion of the branch conversion project, we will shift focus to the<br />
installation of new Syspro modules and 3rd party systems to help improve efficiencies and data visibility. This includes<br />
new sales tax and fixed asset modules and content/document and warehouse management systems.<br />
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