Running a business requires equal contributions from front end and back office operations. Back office operations are invisible to customers, but they play a crucial part in a business. They perform a supporting role enabling front office departments to perform at optimal productivity. With digital transformation entering every industry, streamlining the back office process by adopting digital technology can hold the key to reducing operating costs and increasing productivity. This blog deals with what are back-office functions, ways to streamline back-office systems, and how automation can improve office operations.
Table of Contents
Back Office – What is it?
Organizations are made up of several departments and functions, but there are only 2 main operational systems. These systems are front and back office. Front office operations are mostly client-facing operations. Back office operations are support functions for customer-facing processes. The key difference between these two systems is that back office operations serve as a business’s cost center, whereas the front office generates revenue.
The back office process is the portion of a company that comprises admin and support personnel. To define back office process we can simply say admin and support operations that are not client facing. What are back office functions? Examples of back-office operations include settlements, clearances, record maintenance, accounting, regulatory compliance, and IT services. A financial firm is segmented into 3 parts – front office (sales, marketing, and customer support), middle office (risk management), and back office (administrative, support services).
The term back office originated when companies designed their offices so that the front portion was occupied by associates who interact with customers, while the back portion was occupied by associates that did not have interaction with customers. While the historical background of back office operations is considered as a conceptual framework for distinguishing admin and support functions from other operational processes. Back office does not necessarily describe the organizational structure.
Office personnel working at the back office enable client-facing colleagues to attract new business opportunities, better serve existing customers, and reap revenue. Back office employees equip businesses with the strategic forecasting, planning, monitoring, and measurement of data required to track performance and informed decision making. Similar to the engine of the car that keeps it running, back office operations keep the business running. The main functional areas of back office operations are –
- Financial management – This includes accounts payable and receivable, payroll, revenue management, reporting, taxes, governance and compliance.
- Advanced forecasting – This includes predictive analytics, reporting, and risk management.
- Administrative functions – This includes support of various departments within the company.
- Legal functions – This includes all the legal activities around the firm.
- Procurement functions – This includes all of the procurement related activities.
- Customer service – All the activities around handling customer queries and complaints.
Most of the back office operations can be automated to increase operational efficiencies, which lowers costs and boosts productivity. Working invisibly in the background of every thriving business is a back office that manages its core operational areas and provides support to the front office. Without the back-office function, orders for products and services wouldn’t be processed, employees wouldn’t be recruited, legal disputes wouldn’t be resolved, and transactions wouldn’t be recorded, to name just a few business-critical back-office tasks. The more efficiently and intelligently the back office operations are executed, the more effective it will be at supporting the business.
Why are Back Office Operations Important?
Efficient management of back-office operations helps organizations focus on serving customers and meeting goals. For example, the ability to quickly access data allows HR to identify and recruit top talent and equip IT team members with the tools they need to perform their duties. Other crucial back office operations include preventing non-compliance, and identifying and correcting any non-compliances so that the company does not incur any penalties or fines.
Back office operations also play an important role in risk management, which ensures that the company operates efficiently and effectively. Back office processes help protect the data and assets of the company. Back-office operations also ensure that businesses deliver goods and services accurately and on a timely basis. Back office processes focus on customer satisfaction as it is the basis for competition and success metrics in many sectors. Components in back office operations include data management, record keeping, inventory management, and order processing.
Common Business Administration and Support Functions
So what are the main back office functions? We typically consider back-office operations with critical work that does not require customer interaction. There are back office functions in almost every department in an organization. Let us look at the common business administration and support functions in an organization.
Human Resource Management – It may come as a surprise that human resource functions are considered back-office operations. Recruitment and hiring for instance involve a lot of interactions with prospective hires that the HR professionals do not know. The main function played by HR professionals in the hiring and recruitment process is representing their business to people outside the organization, without much personal interaction. HR activities focus on bringing new people into the organization, rather than selling products or services, which qualifies as back-end operations. Some of the human resources activities include –
- Recruiting
- Employee onboarding
- Compensation and benefits management
- Resolving internal conflicts
- Maintaining employee data
IT – The IT department in an organization is typically associated with back-office operations. IT professionals work in the background to keep all the processes and systems up and running. This department supports the organization’s technological infrastructure in the form of hardware platforms and software applications. The smooth technological functions along with the invisible back office nature of IT operations make it an irreplaceable part of any business and often an under-appreciated one. Typical back office operations carried out by the IT department include –
- Database management
- Network Administration
- Programming
- Security engineering
- Technical support
- Software and system training
Finance – Financial institutions perform different types of work for customers including one-on-one finance consulting. However, the work performed by finance departments within wider organizations is considered back office. The back office operations that comprise finance and accounts payable departments carry out are listed below-
- Accounting
- Bookkeeping and reconciliation
- Financial analysis and reporting
- Tax and audit preparation
- Strategic development
- Investment management
Legal and compliance– All organizations need to be legally compliant and also adhere to internal and external regulations and policies. Failure to do so may even result in the canceling of licenses and/or penalties. Small organizations usually outsource the legal work, while large organizations usually have an in-house legal team that takes care of all the legal matters concerning the firm. All these activities are carried out in the back end and do not require direct interaction with the client. Regulatory compliance activities require regular auditing of process and system data to ensure that processes and systems are compliant with regulatory requirements laid down by the industry to which the company belongs. Similar to legal compliance activities, regulatory compliance management also is a back-end operation that does not involve interaction with clients. Some legal and compliance management activities include –
- Legal compliance management
- Risk assessment and management
- Regulatory compliance audits
Data processing roles – Processes and systems generate a lot of data that needs to be gathered, stored, and processed to gain valuable insights. All data management activities are back-office operations that handle data from processes and systems that keep the organization running. Typical data management roles that are back-office operations include –
- Data entry
- Data analysis
- Data management
Payroll – Payroll operations are typically back-end operations. Tasks like managing employee salaries, wages, taxes, deductions, and benefits to specialized service providers make up the payroll process. All these tasks are done at the back end, without involving client interaction.
Bookkeeping – Maintaining accurate financial records requires high levels of accuracy and consistency. Activities like recording transactions, reconciling accounts, and preparing financial statements are all carried out at the back end, without any interaction with clients.
Sales tax management – Sales tax management involves calculating and collecting sales tax, filing tax returns, and staying up to date with changing tax laws. All these activities can be complex and time-consuming. These tasks are all carried out as back-end operations without any client-facing roles.
Now that we know the business functions that are categorized as back-office operations, let us look at the industries that have a larger volume of back-office operations.
Service industries – Service-based industries have large customer-support operations and customer-processing functions. Telecom, cable, and power companies are examples of service industries that benefit from large back-office operations. The back-end operations in such industries include handling customer accounts with varied pricing, and regulatory and tax compliance activities based on different geographies.
Financial service organizations – Industries like banking, wealth management, and insurance, involve meticulous keeping of huge data record volumes. Consistent process flow and security in such industries is paramount and involves substantial back office operations.
Government agencies – Large size back offices are a must for running government agencies. A variety of service functions like funding a variety of modernization projects, upgrading at small grassroot level, overhauling major agencies are carried out at the back end.
Retailers – Online retailers especially require an extensive back office system that integrates legacy systems with modern cloud-based ecommerce platforms.
Although all of the above industries have had people-intensive support functions, that have traditionally been carried out by manual systems. Introduction of technological innovations like workflow automation brings order and streamlines back office operations. The efficiency and productivity of the back office is greatly improved by using process automation solutions.
Components of Back Office Systems
A thorough understanding of the components that make up back office systems is essential to automate these operations. All back office operations can be categorized as one of the components –
Data management – Most of the back office departments carry out data management activities like accounting and HR in company databases. These databases are used for analysis purposes for analyzing and identifying data patterns and provide users with useful insights on customer behavior and market trends. Data management staff must routinely organize and store data, to ensure its integrity and security. The act of entering data into systems and performing analysis is repetitive and labor-intensive. The repetitive nature of such tasks makes them prone to errors and duplication. Digital conversion by automating data management not only improves accuracy, but also improves efficiency.
Record keeping – This is a vital function in the back office operations. Record keeping is extremely important in digital transformations that set new standards for transparency and accountability. Maintaining customer transaction records allows companies to improve the personalization of their customer’s experiences. Back office solutions allow businesses to outsource record keeping to external parties.
Inventory management – Ordering, storage, organization, and movement of inventory are the main operations in inventory management. Inventory management activities that are part of the organization’s supply chain include replenishing supplies of products and materials. Back office operations in inventory management are responsible for ensuring that a business has the right product in place at the time they are needed.
Order processing – Processing orders is a back-office activity that involves both receiving and fulfilling customer requests for products and services. Order processing involves a crucial series of workflows that make up the customer’s journey from buying and receiving goods to vendor vetting, contract negotiations, etc. Order processing includes several repetitive points of data entry and analysis that are carried out by back end personnel. When these points are automated, the overall efficiency of order processing can be greatly improved.
Back Office versus Front Office
Even though back-office staff do not interact with customers, they tend to actively interact with front-office staff. For instance, a manufacturing equipment salesperson may enlist the help of back-office staff to provide accurate information in inventory and pricing structures. Real estate marketing professionals may frequently interact with sales agents for creating attractive and relevant marketing materials. Similarly ITprofessionals may regularly interact with all divisions within the company to ensure proper functioning systems.
Several business school students see back office work as a way to gain experience within a firm and potentially network up into the Front office roles. Although the nature of back office operations vary from one form to another, the work in back office roles is significantly different from front office.
The front office is responsible for attracting new clients and servicing existing clients, in a nutshell, they play a client-facing role in the business. The back office personnel on the other hand, work to service the transactions carried out by the front office. They have absolutely interaction with the clients. In simple terms, we could say that the front office is the back office’s client.
| Back office processes | Front office processes |
| Do not generate revenue directly | Generate revenue directly |
| Support daily operations | Can be outsourced |
| More chances of automation | Less chance of automation |
| Includes departments like HR, IT, Finance | Includes departments like sales and marketing, public relations, brand enforcement, customer engagement, client services, and technical support |
Challenges in Back Office Operations
Back office operations employees are expected to do more with less, which requires them to strike a balance between custom service and operational efficiency. Common challenges in back office operations are –
Maintaining operational visibility – The traditional method of carrying out back office operations by visiting departments to visually gather data is no longer viable, given expanding business operations. Moreover, carrying out back office operations manually does not provide the visibility and transparency over back end activities. The lack of visibility brings down the efficiency of back end operations.
Employee productivity – Business leaders of traditional back office operations do not have access to recent data on employee productivity. This results in leaders mistakenly relying on subjective experiences that are supported by a few metrics only. Limited access to data does not provide a holistic view of the process.
Turnaround times – Back end operations are not only labor- and data-intensive, but also repetitive and mundane. When teams spend a substantial amount of time working on these repetitive tasks they do not find time to work on strategic tasks that contribute directly to revenue generation.
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Modern Back Office Operations
Traditional back offices were reliant on manual operations that were not only time consuming, but prone to errors and inconsistencies. Back office operations play a supporting role to front office operations, so in many ways a successful front office requires a robust and streamlined back office process. Modern back offices are more aligned to evolving business requirements by adopting technological innovations like process automation, workflow automation, and robotic process automation.
A modernized back office is more equipped to deal with the demands of expanding businesses. Front office personnel require updated data on consumer behavior and preferences, which is actually gathered by back office operations like data management. So, if you want your business to keep up with evolving customer expectations, you need to modernize your back office systems. The practice of outsourcing back-office operations has gained popularity over the past decade owing to the increased adoption of modern technology. The driving factors for this evolution are mass labor shortage, shift in market focus, and need for continuous process improvement. Let us look at the top trends that are changing the way back office functions.
1- Process Workflow Automation – The labor- and data-intensive nature of back office operations fits the bill perfectly for workflow automation. Tasks that are repetitive, labor and data intensive, and require very little to nil human intervention are the right candidates for workflow automation. Back office operations like data management, record keeping, order processing, etc can be successfully automated with the right workflow automation solution. Automating these processes not only reduces human effort, but also reduces the incidence of errors and delays.
2- Artificial intelligence and machine learning – Think process improvement, think artificial intelligence! Artificial intelligence has gained traction over the past decade or so owing to the need for continuous process improvement across industries. Machine learning which plays a pivotal role in AI-based systems, gives computers the ability to solve problems analytically and overcomes the challenges faced by back offices.
3- Block chain technology – Block chain technology in simple terms is blocks of smaller chains, each chain made up of multiple transactions. The system spans across networks, which provides visibility into any new or altered transaction for anyone with access. Block chain technology has been widely adopted by the financial services industry to reduce the complexity of business operations. Back office operations in the finance industry must look to adopting this technology for fool-proof, hack-proof transactions.
4- Robotic process automation (RPA) – Robotic process automation allows humans to create and deploy machine bots to take care of repetitive and laborious tasks. RPA can be applied to back office operations for increasing operational efficiency.
Why is Cflow the Best for Back Office Automation?
Like we said, workflow automation is one of the effective ways to improve efficiency of back office operations. There are many contenders in the market for workflow automation. Cflow is definitely the best solution for automating your back office operations. Why? How? To start with, Cflow is a no code process automation solution that can be set up without writing even a single line of code. Let us look at some of the features of Cflow that make it “THE” automation solution for your back office.
Customization – Cflow is a flexible and scalable workflow automation solution that can be customized to suit unique requirements of every business.
Data management – With Cflow, you will have anytime, anywhere access to key documents. Updating, storing, and managing your data is a breeze with Cflow.
Workflow analytics – The business activity monitor in Cflow provides deep insights on process times, inefficiencies, and bottlenecks, which enables users to make instant changes/improvements to eliminate process redundancies.
Kanban Projects – Back end operations like IT support require efficient task prioritization. The Kanban feature in Cflow allows users to prioritize tasks effectively.
Conclusion
Synergy of front and back office operations is a must for a successful business. The back office process is often overlooked and not given the importance it is due, which affects front office operations. A streamlined back office is a must for smooth running of a business. So, let us get started with streamlining your back office operations with Cflow. Sign up now.
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