Opex Variables
This article explains Opex (Operating Expenses) variables in Model Reef.
You will learn:
What an Opex variable represents.
How Opex variables differ from COGS and Staff variables.
How Opex affects P&L, Balance Sheet and Cashflow.
Patterns for modelling fixed, variable and semi variable operating costs.
What an Opex variable is
An Opex variable represents an operating expense that is not classified as COGS or Staff, for example:
Marketing and advertising spend.
Rent and utilities.
Software subscriptions and tools.
Professional services and consulting.
Insurance and office overheads.
Each Opex variable:
Lives in the branch where the cost is managed or controlled.
Has a category such as
Opex - Marketing,Opex - Rent,Opex - Other.Participates in EBITDA and operating cashflow.
Opex vs COGS vs Staff
Key distinctions:
COGS
Direct costs that sit above Gross Profit and are closely tied to revenue.
Examples: cost of goods sold, direct production labour, hosting directly tied to use.
Staff
Employee costs with payroll behaviour, often including salary, oncosts and timing for wages, super or pension and payroll tax.
Opex
Everything else that is operational but sits below Gross Profit.
Often includes marketing, overheads and administrative expenses.
Choosing between these types affects where the cost appears in the P&L and how it is analysed, but the timing engine handles payables and cashflow the same way.
How Opex variables use drivers
Opex variables can be:
Fixed per period
Example: rent or software subscriptions charged per month.
Opex = FixedAmount.
Variable with activity
Example: marketing spend per order or per customer.
Opex = ActivityDriver * CostPerUnitDriver.
Escalating over time
Example: overheads growing with inflation.
Opex = BaseCost * InflationIndex.
You can use presets for recurring schedules, escalation patterns or ML based extensions from history.
Opex in P&L and EBITDA
In the P&L:
Opex variables reduce EBITDA.
Categories and subcategories let you break out costs by function, such as marketing, rent, technology or overheads.
Staff variables are often shown separately from general Opex for clarity.
A clear Opex structure makes it easier to see which costs are strategic, which are variable and which are fixed.
Opex in Balance Sheet and Cashflow
In the Balance Sheet:
If Opex is paid immediately, there is no payable.
If Opex is paid after a delay, an Accounts Payable balance is created until cash is paid.
In the Cashflow Statement:
Opex variables feed Payments to suppliers.
Combined with COGS and Staff, they determine operating cash outflows.
Timing is governed by the same delay rules used for other expense types.
Common Opex modelling patterns
Examples:
Marketing
Baseline marketing budget per month.
Additional budget linked to revenue or new customers.
Split across channels using subcategories and drivers.
Rent and property related costs
Fixed per branch or store.
Escalating annually based on lease terms or indices.
Potentially replicated across branches using the Data Library.
Overheads and support functions
Costs allocated to entities or divisions using drivers or allocation ratios.
Separate Opex variables for IT, HR, Finance, etc.
Opex variables help encode the cost structure of running the business beyond direct delivery of goods and services.
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