OPEX

OPEX is what it costs to run the company, apart from delivering the product to customers. Your CFO splits it into R&D, S&M and G&A:

• R&D (research and development) - the engineering, product and design cost of building and improving the product
• S&M (sales and marketing) - advertising, lead generation, the sales team
• G&A (general and administrative) - finance, HR, legal, office rent, insurance, accountants and lawyers

Every salary lands in one of those, or in COGS. Executives too. The CTO and VP Engineering usually sit in R&D, the CRO in S&M, and the CEO and CFO in G&A.

R&D is the one you own

Most of your engineering budget is R&D. Some of it might not hit the income statement right away. If your company capitalizes software development, part of what your team spends building new features moves to the balance sheet and gets amortized over a few years. Ask your controller whether they do. See Capitalized Software.

The stuff that's easy to miss

• internal tools like Slack, email and productivity apps are G&A
• internal IT and any infrastructure that isn't production
• equipment works differently. Anything above the company's capitalization threshold is recorded as an asset when you buy it. What hits OPEX is the depreciation of that equipment, a little every year.