How To Expense Data Storage as OpEx

• Standard
• Business Expenses, Digitizing AP

If you’d rather handle digital data storage as an operational expense than as a capital expenditure, it’s time to outsource your data storage. Whether you lease servers or purchase cloud storage, handling data storage as Opex can be a good step for your company. There’s less risk, more flexibility, and you get as good (or better) level of service.

Capex vs. Opex Tech Spending

Simply put, capital expenditures are major investments. These expenses are depreciated and show up on the balance sheet over the life of the asset, typically a period of several years. New computers are one example.

In contrast, operating expenses are ongoing fees. They show up on on the profit and loss account and the full cost is deducted in a single tax year. Printer ink and fees paid to an IT consultant are two examples.

So which one’s better? It depends. Do you want money to leave the business in one lump sum and then spread the deductions for your tech spending out over several years? Or would you rather pay for and deduct actual costs yearly, with no long-term obligations?

What Capex Data Storage Looks Like

Setting up an on-premise data center is typically a capital expenditure. Purchasing servers, storage hardware, and software licenses happens all at once and is handled as Capex.

In addition, you’d have operational expenses for keeping the data center running. You’re also stuck with what you purchase. If it turns out you don’t need that much storage space, you’ll have spent money on tech that’s just sitting around collecting dust.

Limited Capex budgets make getting funding for these sorts of things difficult. Markets, private lenders, and/or in-house financial conservation can limit the amount of money available. Businesses are looking for alternatives to either 1) tying up capital in large lump-sum investments or 2) the extra charge of financing a major purchase.

Opex Solutions to Data Storage

There are a couple ways to shift data storage expenses over to Opex. If you still want physical servers on-site, your company can lease servers from another company and set-up a private cloud. The leasing fees are operational expenses.

Another option is purchasing cloud storage. Another company owns the data center where your information is stored and you pay for secure cloud storage space. You simply upload your data and it’s backed up for you. This is the service NextProcess offers.

More Reasons to Switch

Changing data storage expenses from Capex to Opex isn’t the only reason to outsource your data storage. Both options eliminate the capital expense of setting up your own data center, as well as the operational expenses of maintaining the center. In addition, you don’t carry the costs of upgrading when technology advances. The company you’re buying storage space from does that.

Want to learn more about your data storage options? Contact NextProcess to schedule a demonstration of our document management software and see how easy it is to store your records digitally.

Disclaimer: The information on this website should not be used in any actual transaction without the advice and guidance of a professional Tax Adviser who is familiar with all the relevant facts.
Although the information contained here is presented in good faith and believed to be correct, it is general in nature and is not intended as tax advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals’ specific circumstances or needs and may require consideration of other matters.