What are non-operating expenses? 10 common examples and how to record them

As you sort through your business expenses, you’ll likely encounter costs that fall outside your core business operations. These are known as non-operating expenses.

Below, we explain non-operating expenses, why they matter, and how to track and manage them. Plus, we explore common examples and provide tips to help you better understand these costs.

What are non-operating business expenses?

Non-operating expenses are costs your business incurs that aren’t directly related to your core operations, such as production, sales, or service delivery. These might include non-operating costs such as interest charges, inventory write-downs, or costs associated with restructuring your business.

These expenses appear alongside non-operating income, such as gains from investments or asset sales, on your income statement. Both non-operating income and expenses offer insight into financial activity outside of your main operations.

Why is tracking non-operating expenses important?

Non-operating expenses help you understand your business’s true operating performance. By separating these costs from day-to-day business operations, you can more accurately evaluate how efficiently your business runs, without the influence of one-time losses or external financial events.

More specifically, tracking and analyzing non-operating costs helps investors assess operational health, separate from financing or extraordinary events. It also supports better forecasting and budgeting and reveals where strategic changes can improve long-term profitability.

What’s the difference between operating vs. non-operating expenses?

Operating expenses (OpEx) are the costs required to sustain your business operations. These are day-to-day costs like rent, utilities, and salary for administrative staff. Non-operating expenses, on the other hand, are unrelated to core operations and are usually reported separately.

Some expenses don’t fall neatly into either category without additional context. For example:

• Depreciation expense is typically an operating expense. But if it relates to non-core assets, it may be reclassified
• Bad debt expense is usually an operating cost, but significant write-offs from non-operating activities (like unrelated investments) may be viewed differently
• Rent for your headquarters is OpEx, but rent from investment properties or idle assets may fall under non-operating expenses

Because of this, it’s important to apply consistent accounting principles and review your expense classifications regularly, especially when preparing for audits or financial reporting.

10 common examples of non-operating expenses

Some types of non-operating expenses are one-time costs, while others recur depending on the nature of your business. Below are 10 common examples of non-operating expenses that small business owners encounter:

1. Inventory write-offs

If your inventory becomes unsellable because it’s lost, stolen, damaged, spoiled, or outdated, you can write off the value of that product or materials. When that happens, 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 business tax deduction for the value of the lost inventory.

2. Legal settlements

If your business is involved in a lawsuit and you need to pay a settlement to the plaintiff, that settlement is a non-operating expense. Legal fees, like those charged by counsel, are still regular operating expenses.

3. Interest expenses

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

4. Restructuring costs

Costs you incur due to corporate or organizational restructuring are also considered non-operating expenses. Examples of restructuring expenses include acquisition costs and severance pay for workers who are laid off.

5. Relocation costs

If you need to relocate your business from one physical location or building to another, the costs associated with this process are non-operating expenses. This includes obvious expenses such as movers and transporting your property, but also employee relocation stipends or recruitment costs.

6. Losses on investments

Say your business has extra funds and you invest them in other ventures or financial instruments, rather than focusing on its core business. If these investments result in a loss, those losses are tracked as a non-operating expense.

7. Foreign exchange losses

Foreign exchange rates are constantly fluctuating. If your business holds foreign currency, for example, because you operate in multiple countries or conduct international business, 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, you’d record that loss and any costs associated with recovery as non-operating expenses. Common examples include damage from hurricanes, floods, earthquakes, or tornadoes.

9. Losses on asset sales

Businesses often sell assets they no longer need. Examples can include real estate, equipment, intellectual property, or even entire subsidiaries that no longer align with your business plan. If the sale of assets results in a loss, those losses count as non-operating expenses.

10. Accounting method changes

If you need to make changes to your business’s accounting methods, it can result in changes to the recorded value of both liabilities and assets and may cause losses where there previously were none. Losses originating in this way are non-operating expenses.

How to record non-operating expenses on an income statement

Non-operating expenses reduce a business’s net income but do not impact operating income. On a company’s income statement, they appear below operating profit (or EBIT) to show their effect separately from core business activities.

Income statement snapshot

Here’s what’s typically highlighted on an income statement, alongside a table for quick reference:

• Operating expenses: Day-to-day costs of running your business
• Operating income: Profit from core business operations
• Non-operating expenses: Costs unrelated to operations, subtracted from operating income
• Net income: Total profit after all expenses are accounted for

Impact on profitability

Since you separate non-operating expenses from operating income, investors and analysts can clearly see your day-to-day business performance without irregular or external costs. However, these expenses still lower your net income, which can hurt your company’s profitability, impact financial ratios, increase tax burdens, and even shake stakeholder confidence.

How Ramp simplifies tracking and categorizing non-operating expenses

Non-operating expenses like interest payments, legal settlements, and asset write-downs can throw a wrench into your financial reporting if they're not properly tracked and categorized. These irregular costs often slip through the cracks or get misclassified as operating expenses, distorting your true business performance and making it harder to make informed decisions.

Ramp's expense management platform tackles this challenge head-on with intelligent categorization and real-time visibility. The platform automatically captures and categorizes expenses as they occur, using merchant data and transaction details to distinguish between operating and non-operating costs. When your legal team charges a settlement to the company card, Ramp recognizes the vendor and transaction type, automatically flagging it as a non-operating expense rather than lumping it with regular legal fees.

The real power comes from Ramp's customizable rules and workflows. You can set up specific categorization rules for known non-operating expense types, ensuring consistency across your organization. For instance, you might create a rule that automatically categorizes all transactions from your investment broker as non-operating investment expenses. Your team members don't need to remember complex accounting rules – Ramp handles the categorization automatically based on your predefined criteria.

Ramp's real-time reporting dashboard gives you instant visibility into these non-operating expenses, breaking them out separately from your core business costs. This separation is crucial for accurate financial analysis. You can quickly see how much you're spending on interest payments versus your actual operational costs, helping you calculate meaningful metrics like EBITDA without manual adjustments. The platform even allows you to add notes and documentation to transactions, creating an audit trail that satisfies both internal reviews and external auditors who need to verify the classification of non-operating items.

How Ramp simplifies tracking and categorizing non-operating expenses

Non-operating expenses like interest payments, legal settlements, and asset write-downs can wreak havoc on your financial reporting if they're not properly tracked and categorized. These irregular expenses often slip through the cracks or get miscategorized as operating costs, distorting your true business performance and making it harder to spot trends in your core operations.

Ramp's expense management software tackles this challenge head-on with intelligent categorization features that automatically distinguish between operating and non-operating expenses. When an unusual expense hits your books, Ramp's AI-powered system flags it for review and suggests the appropriate non-operating category based on merchant data and transaction patterns. You can set up custom rules to automatically route specific vendors or expense types to non-operating categories, ensuring consistency across your organization.

The platform's real-time visibility gives you instant insight into all expenses as they occur, not weeks later when reconciling statements. You can create separate approval workflows for non-operating expenses, ensuring these exceptional items get the right level of scrutiny from finance leadership. Custom tags and memo fields let you add context to each transaction, making it easy to explain variances during month-end close or audit reviews.

Ramp also integrates seamlessly with your existing accounting software, automatically syncing properly categorized expenses to the right GL accounts. This eliminates the manual work of reclassifying expenses after the fact and reduces the risk of errors that can impact your financial statements. With detailed reporting capabilities, you can easily separate operating from non-operating expenses in your analysis, giving stakeholders a clearer picture of your core business performance and helping you make more informed strategic decisions.

Save time with automated expense tracking

Beyond handling complex non-operating expenses, Ramp streamlines your entire expense management process. Configure your accounting rules once, and let automation do the heavy lifting. Your team submits expenses without worrying about classifications while your finance team reviews and approves with confidence.

Ready to see how Ramp can transform your expense tracking? Take an interactive product tour.