10 common examples of non-operating expenses

As you categorize your business expenses, you’ll probably find a number of costs that don’t directly relate to your business’s day-to-day operations. These are known as non-operating expenses.

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Below, we take a closer look at what non-operating business expenses are and how they differ from operating expenses (OpEx). We also walk through some of the most common examples your business is likely to encounter and explain why it’s so important for you to track them.

What are non-operating business expenses?

Non-operating expenses are any costs your business incurs that aren’t related to your core business activities. Any expense that is not directly tied to the production, sale, and distribution of the main product or service your business sells is considered a non-operating expense.

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A few examples can include interest charges that your business pays to service the debt it carries, inventory write-downs, and costs related to restructuring or relocating your business. We’ll cover more examples in depth below.

Non-operating expenses vs. operating expenses

An operating expense is any cost your business incurs as part of its normal, day-to-day operations. These expenses either directly or indirectly facilitate the production and sale of your company’s product or service.

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Some examples of operating expenses include rent, utilities, employee salaries and wages, sales and marketing expenses, depreciation and amortization, and office supplies, amongst many others.

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Note that your company’s cost of goods sold (COGS) is a separate line item in most financial statements and is not included in OpEx.

Examples of non-operating expenses

Some common examples of non-operating expenses that your business may incur from time to time include:

1. Inventory write-offs

If you have inventory that becomes unsalable because it’s lost, stolen, damaged, spoiled, or outdated, you can write off or write down the value of that product or materials. In doing so, you record a loss for your business, which is treated as a non-operating expense. The good news is that this also allows you to claim a tax deduction for the value of the lost inventory.

2. Lawsuit settlements

If your business is involved in a lawsuit that results in you paying a settlement to the plaintiff, that settlement is a non-operating expense. Legal fees, however, such as those charged by counsel, will still be treated as regular operating expenses.

3. Interest expenses

Does your business carry debt, whether on a mortgage, auto loan, business loan, credit card, or something else? Because interest payments don’t contribute to the core functioning of your business, any interest you pay on this debt is a non-operating expense.

4. Restructuring costs

Costs your business incurs as a part of corporate or organizational restructuring—for example, acquisition costs or severance pay for workers who are laid off—are considered a non-operating expense.

5. Relocation costs

If you need to relocate your business from one building or location to another, the costs you incur during the process are non-operating expenses. This includes obvious expenses like hiring movers and transporting your property, but it can also include less obvious expenses like relocation stipends for your employees or recruitment costs needed to bring on new hires.

6. Losses on investments

When businesses have extra funds, they’ll sometimes put them to work by investing in other ventures or financial instruments instead of their core business. If these investments result in a loss, those losses should be tracked as a non-operating expense.

7. Currency fluctuations

Foreign exchange rates are constantly fluctuating. If your business holds foreign currency—for example, because you operate in multiple countries or do business internationally—and the currency exchange rate decreases, it could result in a non-operating loss for your business.

8. Disaster loss and recovery

If you experience a natural disaster that results in a loss for your business, that loss and any costs associated with recovery are recorded as non-operating expenses. Common examples include damage from a hurricane, flood, earthquake, or tornado.

9. Losses from the sale of assets

Businesses often sell assets that they no longer need. Examples can include buildings, equipment, intellectual property, or even entire subsidiaries that no longer make sense to your business plan. If these asset sales result in a loss, those losses count as non-operating expenses.

10. Accounting method changes

Sometimes, businesses will make changes to the accounting methods they use. This can result in changes to the recorded value of both liabilities and assets—and might even cause losses where there previously were none. Losses originating in this way are non-operating expenses.

Why businesses need to track non-operating expenses

Tracking non-operating expenditures has important implications for your business.

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For one, distinguishing between operating and non-operating expenses is a part of generally accepted accounting principles (GAAP). Accurately tracking expenses in this way enables accurate and insightful financial analysis of your business, which would be difficult if not impossible if all expenses were lumped together.

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That’s because when you filter out the noise of non-operating expenses from your income statement, it becomes easier to see how your core business is performing. It can also help you more easily detect unnecessary expenses and eliminate them.

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Increased transparency also helps keep various stakeholders happy, whether they’re owners, directors, shareholders, or even rank-and-file employees who rely on transparent financial reporting to understand the business’s health.

Track non-operating expenses easily with Ramp

If your accounting team is still manually categorizing expenses, try Ramp. Our expense management software can help you automatically organize and categorize your expenses so you get a clear understanding of your company’s financial health.

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‍With Ramp, you set up categorization rules once and Ramp does the rest, automatically categorizing transactions according to the established logic. This means the employees submitting expenses, and the accounting team approving them, don’t need to worry about whether an expense is an operating or non-operating cost—it’s already done. 

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See a demo to learn more about how Ramp can help your business get a better handle on expenses.