Operating activities are the regular business practices, procedures and pursuits that keep a company running on a long-term basis. Unlike one-time or infrequent activities, such as buying a business or merging with another company, operating activities are part of the normal practices that affect a company’s monthly, quarterly and annual revenues and profits.

Sales and Marketing

The efforts related to planning, creating, distributing, pricing and selling a company’s product or service are operating activities. Large companies divide marketing activities into sub-functions or departments such as sales, advertising, promotions, customer service and public relations.

Production

Making a product is part of a company’s operations and the associated costs are classified as operating expenses, and more specifically, production or manufacturing costs. These include materials, supplies, labor, utilities, repair and maintenance directly related to making one or more units of a product. These differ from overhead costs, which occur from non-production activities such as office administration, marketing, human resources and information technology.

Administration

The operational activities related to running a business that aren’t directly linked to production, sales and marketing fall under a catchall classification called General and Administrative. These include functions such as accounting, human resources, purchasing, continuous improvement, facility maintenance and information technology. Along with sales and marketing expenses, these costs make up the overhead expense of a business.

Start-up vs. Operating Costs

When business owners launch a company, they incur start-up expenses necessary to get the business off the ground before it opens its doors. These expenses might include research costs, real estate and equipment purchases, fees, licenses, permits, deposits and insurance premium payments. For accounting purposes, these are recorded separately from operating expenses when calculating break-even points. For example, when a company spends $100,000 per month and brings in $100,000 in revenue, it reaches an operating break-even point, even if the business still owes investors or lenders $200,000 in start-up capital. Once the business has paid back its initial $200,000 in start-up costs and can pay its bills, it has reached overall break-even.

Operating Revenue

Money earned from a business’s core activities constitutes its operating revenues. This differs from money it earns from investing or the sale of an asset. For example, if a company sells widgets, money from the sale of widgets is classified as operating revenue. This helps a business determine its per-unit profit margins. If the company sells an old machine, patent, building or land, or generates capital gains or interest from investments, that money is classified as non-operating income and isn’t included when a business calculates whether or not a product or service is profitable.