June 6, 2020

Back Office: Importance, Roles & Examples

Anshika Awasthi

What comes to your mind when you think about your favourite brand? The storefront, its product or service, logo, product pricing or maybe its catchy advertising jingle?

Most of you think about your favourite brand by their products, services, marketing campaigns, ideas, its features, personality, etc.

But behind those attractive desiring offerings, one thing which you never think of is its well functional back office, which however is the flesh and blood of your brand’s company.  

What is Back office?

The back office is the operational section of a company that works behind the scene of the business and does not require interaction with customers. For example, processing of products, labour tasks, administration and logistics, inventory management, supply chain, human resources, and other support roles.

Back office comprises of the area that doesn’t generate income for the business but provides vital support and administration.

For example, back office of a Marketing firm would encompass:

  • Employees making marketing calls
  • Handling inventory
  • Order processing on E-commerce websites
  • Customer support etc.

Whereas, a back office in an Investment Bank would encompass:

  • Maintaining database
  • Handling company finance
  • Designing a cash flow system etc.

Importance

Back office is the backbone of the workplace

It is the backbone of any company. Finance and accounting function is the most crucial aspect with payment processing being the fundamental part of the workplace. While every department plays a pivotal role, they’re all backed up by the backend department.

Cost saving of the company

In this evolving digital era, customers are reaching organisations more digitally than ever. Customers’ interaction with the front line staff is decreasing, bringing back office to the forefront, forcing it to regulate its processes.  

This however is cutting requirement for employees in customer dealings, saving the cost of many workplaces.

Back office brings efficiency

Many of the start-ups, remote work companies, virtual workplaces, freelancing, outsourcing, etc. lack resources, budgets, and workforce. In such a scenario employees usually multitask. For example, a digital marketing campaigner is also analysing and creating reports, handling both office and fieldwork, etc. If there were a specific department/person for report creation, the work would have been distributed and performed efficiently.

Back office brings efficiency by performing all the desk jobs like report creation, analysis reports, data management, which serves as the base for the front end workplace tasks.

How Back office works?

Irrespective of its invisible presence, back-office provides essential functions that are related to the cost side of the business in contrast to the front office which affects the income side of the business.

This costs side of the business can be classified under Operations tasks. Such as formulating strategies, procuring material and resources, performance improvement, and other tasks that come under paperwork. 

A back office is part of the company responsible for all the business-related functions related to operations. Their roles and duties do not require interaction with customers instead they equip the front end workers to perform their client-facing duties. Although the back-office employees do not interact with customers, they, however, tend to engage with front office employees. For example:

  • A salesperson from the manufacturing department may require work input of the back office to provide information about inventory and pricing structure.
  • Marketing professionals interact with sales agents for their inputs in creating relevant marketing materials.
  • The marketing department depends on the IT department’s web developers, software engineers, coders, testers for a proper functioning system.

This is how back office works in companies throughout the world.

Back office Roles

Back office staff offers support responsibilities that help the front office work well. We have divided the roles and duties of back-office into three broader categories as follows:

Reputation

In this competitive market, any company needs to protect its reputation to be in the top game. Excellent service from the front office can all too easily be destroyed by an inefficient back office. Courteous, efficient processing and follow-up operations can make all the difference. Thus, an efficient back office is important for a company’s reputation.

Risk

Risk management holds high value in today’s market. However, risk cannot be efficiently managed when the original input is either incomplete or inaccurate, which could then lead to miss-management in external reports.

Processing

From the moment a deal is signed, the front office is only concerned when and how to turn the deal into profit. Thereafter its completion, all the subsequent responsibilities are passed on to back office.

The back office handles all the internal and future transactions between the client and the company. At this point, the back office holds equal control with the client’s trade as the front office.

Example of Back office jobs

Market Research

Market research is carried to discover consumer opinions to anticipate their future needs on product pricing, packaging, and feedbacks on advertising campaigns and analysing consumer trends. This market understanding is critical in providing products and services that consumers require.

Based on qualitative and quantitative market research, a company, structures manufacturing, distribution, fixes budgets in short plans a visionary route in brand building.

The back office plays the role of providing inputs that are carried further by front office in the form of vision evaluation.

Accounts and Finance

This entails all the duties with respect to all transactions which is a result from the front office. For example, capital market, corporate finance, syndicated loans, processing payments, cash management, margin account management, and ancillary matters which includes management of reports, P&L calculations, and risks.

Others

  • Managing database
  • Technical expertise
  • IT competencies
  • Processing projects
  • Handling digital aspects etc.

Example of Back office

Today, most back-office are located in cities where labour costs are low, commercial leases are inexpensive, sufficient area with lower property value, and an adequate labour pool is available.

This is the reason why many companies are now preferring outsourcing of back-office in offshore lands to reduce costs. With technological advancement, remote working, freelancing, this has been made possible with the additional perks of rent saving, cost-effective remote hiring process and increased productivity.

Some companies offer incentives to their employees who accept remote working. For instance, a financial service firm offers its employees a $500 housing subsidy to experienced professionals who are opting for remote working. It almost costs $1000 every month to secure office space per employee, a housing subsidy of $500 can result in saving of $6000 per year to the company. Cost savings is an important aspect of outsourcing the back office.

Bottom Line

Today, back-office holds less value in comparison to the front office. The back office is seen as a way to learn and gain experience while exponentially networking with front end professionals. It’s easy to come out successfully in the hiring process for a back-office position than front-office position. However, with the upcoming digitalising and entrepreneurship, there will be a time when office working will shift to automation. The back office will be seen eye to eye with front end departments.

About the author

Competitive, real; loves to keep working for what it wants. An extrovert who lives by her own ideas and methods.


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