CapEx vs OpEx budgets, what are they?
Businesses face an array of expenses, most can be categorised into two types: OpEx and CapEx. These are broad terms which stand for operational expenditure and capital expenditure, respectively. Operational expenditure is the day-to-day expenses required to maintain business activity and usually includes recurring costs such as rent, cost of consumable goods, payroll etc. On the other hand, capital expenditure is money spent by a business or organisation on acquiring or maintaining fixed assets, such as land, buildings, technology and equipment.
The one crucial difference when considering OpEx vs CapEx is that operational expenses are allowable for tax purposes whereas capital expenses cannot be. There is generally a relationship between the two types of expenses.
CapEx vs OpEx in Healthcare
For hospitals, the operating expenses of healthcare premises typically equate to the capital construction cost every 2.5 years[1], a significant amount.
Capital Expenditure and Operational Expenditure budgets often sit separately, with different decision makers or departments. This can cause a challenge in healthcare when important decisions about items such as medical devices or equipment, are made in silos.
Hospital purchasing departments should look at a holistic approach, beyond the “lowest cost now” culture and think more about long-term or overall benefit. All hospital stakeholders benefit from this approach, and knowing how to get the most out of available budgets is essential to the improvement of our healthcare systems.
A shift in thinking towards getting the most from the combined budgets would dramatically impact outcomes for hospitals. For example, reducing the thickness of insulation on pipework could save thousands in the short term, but cost tens of thousands in the long term in heating bills or burst pipes.
How can TRITEMP™ help optimise budgets?
TRITEMP™ can optimise budgets by helping hospitals to make lifetime savings on their consumables. TRITEMP™ is a non-contact infrared thermometer and does not touch the patient, eliminating the need and therefore recurring costs of replacing single-use plastic probe covers. It is CE marked for quality and ISO13485:2016 standards are adhered to making it suitable for clinical settings.
Since it uses zero consumables there are no costs of stocking and disposing of single use plastic probe covers, which in turn reduces operational expenditure.
To put this into real terms, a 900 bed hospital using TRITEMP™ will save approximately £100,000 in consumable costs over the first 2 years. This is enough budget to pay for five life-saving ventilators or the salary of around three nurses. That’s not to mention the cost for disposing of this contaminated medical waste.
We also hear of very high breakage rates of traditional tympanic thermometers amongst the hospitals we work with. In fact, once hospital in Dublin told us they saved 500 engineering hours by switching to TRITEMP™, which by comparison has a breakage rate of just 0.5%.
FAQ’s
Capital Expenditure (CapEx) is money used for the one-time purchase of fixed assets, usually a large sum and generally the assets depreciate over time. This may include property, plant and equipment (PP&E). CapEx is only partially allowable for tax purposes.
Operational expenditure (OpEx) is an expense the business incurs for the upkeep of regular day-to-day operations such as payroll and rent. OpEx is allowable for tax purposes.
Capital expenditure (CapEx) is the money used for large one-time purchases which depreciate, such as property, and is only partially allowable for tax purposes. Operational expenditure (OpEx) is the costs incurred to maintain day-to-day operations and is wholly allowable for tax purposes.
References
- https://hoarelea.com/2018/06/20/capex-versus-opex/
- https://www.investopedia.com/ask/answers/112814/whats-difference-between-capital-expenditures-capex-and-operational-expenditures-opex.asp#:~:text=Capital%20expenditures%20(CAPEX)%20are%20major,to%20keep%20its%20business%20operational.
- https://www.investopedia.com/ask/answers/042415/what-difference-between-operating-expense-and-capital-expense.asp
- https://www.telegraph.co.uk/business/ready-and-enabled/cost-efficiency/operating-expense-vs-capital-expense/#:~:text=OpEx%2C%20on%20the%20other%20hand,OpEx%20is%20entirely%20tax%20deductible
