Back Office Defined (2024)

Actors get many of the accolades for their memorable movies, but their films would never havemade it to the big screen without a large, dedicated film crew working behind the scenes.The same can be said of successful businesses: Customer-visible roles, such as sales andcustomer service, may get most of the recognition, but without a strong back-office“crew”handling many critical operational functions — such as accounting, human resources andIT —a business could fall flat.

What Is the Back Office?

A business’s back office is composed of administrative and support teams that areresponsiblefor operations but don’t directly interact with customers or generate revenue. Whileit hassome historical basis, the term "back office" is simply a conceptual framework used todistinguish various admin or support functions from other operational processes. In otherwords, "back office” and “front office" don't necessarily describe abusiness'sorganizational structure.

They perform the activities that enable their client-facing colleagues to attract newbusiness, better serve existing customers and reap revenue. Equally as important, though,back-office employees equip businesses with the strategic forecasting, planning, monitoringand measurement data needed to track performance and inform decision-making. Like the engineof a car, the back office keeps the business running.

The functional areas of the back office may include:

• Financialmanagement, including accounts payable and receivable, payroll,revenue management, reporting, taxes, governance and compliance.
• Advanced forecasting, with predictive analytics, reporting and riskmanagement.
• Administrative functions, in support of various departments within thecompany.

Key Takeaways

• Back office is made up of personnel who support the operations of a company but do notdirectly interact with customers.
• Back-office activities include managing inventory, processing sales orders andonboarding new employees.
• Businesses often automate their back-office processes to increase operationalefficiencies, thereby lowering costs and boosting profitability.

Back Office Explained

Working invisibly in the background of every thriving business is a back office that managesits core operational areas and supports the “front office,” meaning thecustomer-facing partof a company. Without the back office, orders for products and services wouldn’t beprocessed, employees wouldn’t be recruited, transactions wouldn’t be recorded,legaldisputes wouldn’t be resolved, computers wouldn’t be fixed and datawouldn’t be analyzed, toname just a few business-critical back-office tasks.

The more efficiently and intelligently the back office runs, the more effective it will be atsupporting the business. Employees in the may also pinpoint potential issues, such as animpending inventorystockout that could hurt sales. This requires seamless communication between.

How the Back Office Works

Employees in the front office, such as a salesperson, have the most interaction withcustomers. Employees in the middle office, mainly found in financial organizations, managebusiness risk. Employees in the back office perform all of the administrative and supportfunctions that keep the business operating smoothly.

Back-Office Roles

Back-office roles span the many different departments within a business. These jobs can rangefrom data-entry clerks to specialized research practitioners. Example areas include:

• Finance and accounting: Back-office staff includes staff accountants,financial analysts, bookkeepers and other professionals responsible for bookkeeping andfinancialclose tasks, tax preparation, managing a company’s investments, developingfinancial strategies and analyzing financial performance.
• Information technology: Back-office roles are responsible for managingand maintaining a company’s technology infrastructure, platforms and applications.Jobscan include technical support, network administrators, database managers, programmersand security engineers.
• Legal: Staff in the back office prepare and review contracts and otherlegal documents, conduct research, manage case files and advise the company on legaldisputes.
• HR: Back-office employees lay the groundwork for employee recruitment,hiring and development. They also manage benefits, maintain personnel files and more.
• Procurement: Back-office responsibilities include researching pricesfor materials, products and services; evaluating suppliers; preparing purchase orders;and monitoring order and contract status.

Traditional vs. Modern Back Office

Thriving in today’s fast-paced business world requires automating time-consumingback-officeprocesses or workflows with software. At the opposite end of the spectrum is the traditionalback office, replete with labor-intensive, error-prone manual tasks, such as creatingjournal entries, updating employee time sheets, physically pickingorders from a warehouse and compiling financial data from different areas of thebusiness.

Back-Office Functions

Back-office functions vary, depending on the industry and the products or services a companydelivers. Common back-office functions include:

• Data processing tasks, such as data entry, analysis and management.
• Human resources roles, such as hiring and training employees andoutlining benefits.
• Accounting and finance duties, such as managing records, reportingfinancial information and complying with regulations.
• Legal responsibilities, including developing company policies to complywith various laws and guarding the company against legal risks.

The Importance of the Back Office

In addition to greater efficiency and higher levels of productivity, a well-oiled back officeallows a company to focus on its core competencies and . For example, with the accountingteam in the back office adept at processing invoices and tracking expenses, the front officecan focus on sales and other customer interactions, rather than on problem-resolution.

The back office also plays a crucial role in strategic planning. With streamlined, integratedsystems and accurate data, business leaders have access to a wealth of up-to-dateinformation that drives strategy and accelerates the time to market for new products andservices.

Companies that improve or modernize their back-office operations dramatically outperformtheir more traditional peers, garnering more than twice as much customer satisfaction and 11times the amount of employee productivity annually, according to AberdeenGroup (opens in a new tab) research. Inaddition, awell-functioning back office allows employees tofocus on delivering insights and innovation, rather than crunching numbers and compilingreports, leading to greater job satisfaction and higher talent retention.

Back-Office Challenges

Many of the back-office challenges organizations face stem from relying on disparateplatforms, multiple data sources and siloed software, which slows down workflows andrequires additional labor to maintain and troubleshoot issues. Common back-office challengesinclude:

• Change management: Companies transitioning to modern back-officesystems need to let go of “the way things always worked,” even when the newways promisegreater efficiencies and productivity. In addition, when companies attempt to updatebusiness processes without first reassessing and refining those processes, they mayperpetuate certain inefficiencies. And when leaders lack performance data, theycan’tbegin to grasp the hidden potential of their employees.
• Lack of operational visibility: Low visibility into back-office tasks,processes and data can lead to poor customer outcomes. Semi-regular, manually producedreports fail to disclose many of the issues that often plague back-office processes.Without easy access to data, managers can’t easily drill down into key areas ofthebusiness, or a single process, to gain insight into problems and make improvements.
• Need for real-time supply chain data: Managing customer and partnerexpectations in the face of supply chain shortages, rising costs and shifting buyerbehavior is nearly impossible without access to real-time data. Recent global supplychain issues have driven home the need for businesses to more tightly couple theirsupply chains and inventory management systems with their ERP and customerrelationship management (CRM) platforms.

Back-Office Examples

Thanks to technology, many back-office functions are now handled by employees workingremotely or outsourced to a third party.

Industries With Back-Office Operations

While almost all companies have back-office systems, some industries tend to have largerback-office operations than others. For example:

• Service industries with large customer-support operations andcustomer-processing functions, such as telecom, cable and power companies, benefit froma large back-office operation that often handles customer accounts with differentpricing, regulations and tax structures based on different geographies.
• Financial services organizations, such as banking, wealth managementand insurance companies, require meticulous record-keeping. The governance, risk andcompliance requirements place a premium on consistent process flow and security —responsibilities that back-office personnel manage.
• Government agencies often require large back offices to support avariety of service functions. Many agencies are funding a variety of modernizationprojects, from small grassroots upgrades at local levels to major agency overhauls, toimprove efficiencies and productivity.
• Retailers, especially online retailers, require an extensiveback-office system that benefits from a common platform when integrating legacy systemswith cloud-based ecommerce platforms.

Although these industries have historically had people-intensive support functions, thanks totechnologies like document scanning, workflow systems, data management and processautomation, most of the back-office work is automated today.

Upgrade Your Back Office to Modern Systems With NetSuite

Achieving a unified view of all back-office operations requires a central data source andtight integration of software used by back-office personnel. NetSuiteERP is anall-in-one cloud business management solution with a single integrated suite of applicationsfor managing accounting, order processing, inventory, production, supply chain and warehouseoperations. NetSuite ERP streamlines and automates many critical business processes,ensuring accuracy and data integrity. Companywide visibility is another important benefit.Managers can access financial, operational and transactional data from across theorganization and customize their dashboards, reports and analytics to keep tabs on allaspects of back-office activities.

The back office plays an essential role in a company’s success, providingadministrativesupport for a company’s front-line interactions with customers. Modernizingback-officesystems around a unified platform is instrumental to transforming the back office from acost center to a value center, allowing all departments, including the customer-facing frontoffice, to improve efficiencies and provide an enhanced customer experience.

Back Office FAQs

What does a back office do?

The back office comprises the operational areas of a company that support the front office,which is the customer-facing part of a company. It includes administrative functions, suchas finance and accounting, procurement, HR and legal, as well as customer-support functions,such as order fulfillment, transaction processing, document preparation and disputeresolution.

What are the objectives of back-office operations?

The main objective of the back office is to support all functions of a business withprocesses and technologies that drive efficiency, cost savings and customer satisfaction.The back office processes transactions and maintains accurate financial records. Itidentifies and mitigates potential risks and ensures organizational compliance with relevantlaws and regulations. The back office plays a crucial role in supporting decision-makingwith timely and accurate data.

What are the differences in back office vs. middle office vs. frontoffice?

The back office is the portion of a company made up of administrative and operationspersonnel who support the rest of the business, including the front office. The front officeincludes sales, marketing and customer service functions that directly interact withcustomers. The front office is often considered the revenue-generating part of a business,whereas the back office is described as a cost center.

With the complexity of modern financial transactions, some service companies may implement a“middle office” that tracks and processes transactions made by the front officein an effortto manage risk and compliance and calculate profits and losses before the transactions arereconciled in the back office. The middle office is responsible for ensuring that dealsnegotiated by the front office are accurately booked, processed and paid for and that allrequired compliance standards have been followed. At some companies, specialized legalsupport teams are included as part of the middle office.

What are back-office skills?

Back-office workers must have strong communication and organizational skills. Each role inthe back office requires proficiency in their specific domain. For instance, a data analystmay need experience in computer science, while an HR assistant will need to be familiar withemployment laws and regulations.