Back office outsourcing

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What is back office?

The back office is the portion of a company made up of administration and support personnel who are not client-facing. Back-office is the opposite of the front-office that deals directly with clients.

The functions can include: planning, inventory management, settlements, clearances, record maintenance, human resources, accounting, IT services, logistics, etc.

For example, a firm or company is segmented into three parts: the front office (customer support), the middle office (risk management), and the back office (administrative and support services).

The back office is that part of personnel that don’t generate revenue for the business (on the contrary) but does the managerial operations, at the same time helping the front-office in their duties.

Back office outsourcing

With the growing demand to be globally competitive, companies need to find ways to cut down their operational costs. That’s why businesses use back office outsourcing by hiring contractors and consultants offshore, where the labor costs are cheaper compared to in-house office or in their country in general.

Some of the back office duties that are being outsourced the most are:

  • Human Resource
  • Accounting and finance services
  • Data encoding and data processing
  • Support desks, etc.

Benefits of back office outsourcing

The decision to outsource back office functions comes with a number of potential benefits. As mentioned previously, the main reason is that of reducing costs. With an outside firm handling administrative support functions, the company spares itself the cost of the space, equipment, and personnel that otherwise could be done at the company, but at a costly price.

This also opens up the opportunity for a company to gain experience from these outside firms in aspects of a business that they are not experts in. This is a benefit because not every business can afford to keep expert accountants on staff, but might be able to afford the fees that a back office outsourcing provider would charge.

Back office outsourcing also allows the owners to focus their resources and main attention on their in-house management.  Company productivity and resource management are thus enhanced, making this activity very profitable.