Back Office Outsourcing Services: Which Should You Invest In Right Now?
Any organization must have a comprehensive set of back-office functions. However, this can be an exorbitant cost because employees who work solely on back-office functions typically earn more than those who work in the front office. Back-office processes include managing human resources, making payroll, managing finances and accounting, managing IT, and entering data. Businesses can save a lot of money by using back-office outsourcing services to handle the above tasks.
You can invest in various back-office outsourcing services, but not all are worthwhile. As a result, this article aims to direct you to back-office outsourcing functions that are worthwhile investments.
What is Back Office Outsourcing?
The back office functions similarly to a company’s engine room. A business will fail to function properly if the back office is mismanaged, just as a vehicle cannot start if its engines are not properly working. The entire system is in danger of collapsing and causing chaos in the front office. The back office is a significant part of the business because no business owner wants their operations jeopardized.
Delegating back-office functions to a third-party service provider is called back-office outsourcing. The primary reason for outsourcing back-office functions is to save money on hiring more employees and purchasing office equipment. Many businesses gradually realize the value of delegating non-core functions to back-office outsourcing services to save time for more critical tasks.
Your primary goal as a business is to broaden your horizon. Strong back-office support allows you to focus on your core competencies while expanding your business. It enables you to determine where most of your resources are spent, provides ways to optimize your money, and creates an entirely new strategy for improving business operations.
Back office outsourcing services include:
They can improve the quality of their operations and broaden their business strategies. Almost all functions that do not necessitate your presence for customer-facing tasks can be outsourced. However, remember that the success of an outsourced process will depend on the nature of your company’s operations. Here are some examples of the most commonly outsourced back-office functions:
Data Mining Services
Businesses must frequently refine massive amounts of raw data to extract valuable information. This process necessitates a significant investment of time, money, and other resources. For many businesses, outsourcing data mining to back-office outsourcing services makes the most sense because it allows for more reliable and error-free data mining.
Human Resource Outsourcing
Businesses that outsource human resources can achieve more optimized processes and the highest level of team satisfaction. Human resource outsourcing has numerous advantages. It has helped many businesses free up time and create better and more effective HR strategies over the years. These strategies include leave management, compensation, employee screening and hiring, performance management, employee retention, auditing, and developing a better overall workflow and procedure. It enables businesses of all sizes to save resources while reaping the benefits of improved inter-departmental coordination and a higher return on investment.
It is frantic to process large numbers of transactions for efficient and accurate operations. A synchronous database connected to another database system that can assist in the immediate processing of transaction requests and transaction information is included in transaction processing. For example, if you ask for a transaction in an ATM, the system will respond instantly, either granting or denying your request based on availability.
Information Technology Support Outsourcing
Technical or post-sales support is essential for any organization because it directly affects customer satisfaction and retention. Customers call in to talk about the product, any warranty issues, or any other major or minor technical issues that must be resolved. To deal with the problem, it is critical to be met with a team of professionals and customer service representatives with expert knowledge of the product. Delegating IT or tech support to back-office outsourcing services improves customer satisfaction and relieves your employees of multiple responsibilities. This results in higher employee morale and an excellent return on investment.
Document Verification Services
Businesses must detect forged documents such as customer proof of identification or know-your-customer (KYC) requirements. According to research, businesses in the United States lose billions of dollars yearly due to fraud. As a result, businesses must invest in document verification services to ensure the authenticity of each document they deal with. Many back-office outsourcing services include assistance with customer onboarding and applicant authentication. Back-office outsourcing services can help ensure authenticity in industries ranging from BFSI to EdTech.
Finance and Accounting Function
Finance and accounting functions are critical and mundane for most businesses. They consume a significant amount of precious time from your internal staff, requiring high accuracy and proficiency with complete compliance with regulatory guidelines. Many organizations have seen the value of delegating finance and accounting to back-office outsourcing services. These firms have cutting-edge software and infrastructure and a team of licensed accountants and other industry experts with extensive experience. Internal finance and accounting management takes significant time and money to access software such as Peachtree, QuickBooks, Quicken, Sage, and MYOB accounting, among others. Back-office outsourcing services already have the necessary software and a dedicated team to provide you with all the required assistance. Income statements, cash flow statements, balance sheet, ledger maintenance, tax report and liability, accounts payable management, and bank reconciliation is just a few of the functional tasks that necessitate expert management.
Catalog Management Services
As market competition increases, these services continue to demonstrate their critical role in reaching potential clients. Catalogue management is crucial whether you are a distributor or a manufacturer, both of which need to expedite product information display to consumers. Data maintenance, conversion, updating, and indexing are all part of catalogue management services. These can be accomplished online or offline via inventory or database management. Regardless, the process requires significant time and attention, which is why many businesses prefer to outsource it to back-office outsourcing services.
One of the most commonly outsourced back-office functions is data entry. This is because data entry consumes a significant amount of valuable time and resources. Outsourcing data entry to back-office outsourcing services can significantly reduce your employees’ workload. This is a win-win situation for your company because you will achieve greater accuracy and precision. Furthermore, you will benefit from a growing market. According to one report, the global data-entry outsourcing service industry is expected to grow by approximately $351.84 million by 2023.
Translingual Data Entry
Translingual data entry is critical and necessitates the expertise of multilingual data entry professionals capable of performing data mining and migration and online and offline data entry tasks.
It takes work to manage a large amount of data. Data enables you to make sound and strategic business decisions. As a result, data extractions must be managed by trained professionals and data specialists.
A serious problem arises when data is collected from multiple sources but needs to be correctly compiled, a severe problem arises. Data enrichment aims to ensure accuracy and consistency so that you can trust the data and make sound decisions.
It is an outsourcing myth that only established companies and large enterprises can benefit from off-shoring payroll management to back-office outsourcing services. Outsourced payroll has become increasingly important to start-ups and small businesses. Companies have been able to increase their bottom line in addition to saving money.
Document imaging is converting data from one source to another, such as receipts, forms, paper documents, and images. Businesses can store a large amount of data in digital format thanks to data imaging. Outsourcing this process to specialized personnel improves production efficiency.
Challenges in the Back Office
Your back office is made up of complex operations with multiple roles that are interdependent. Simply put, the others will suffer if one function is not functioning correctly. Following that, here are some of the most common problems encountered in back-office operations.
- Heavy Workloads. Lack of workforce is frequently blamed for the seemingly never-ending workload in the back office. Backlogs will accumulate if this needs to be addressed, affecting employee work quality.
- Difficult tasks. Aside from the volume of work in the back office, having to complete mundane and repetitive tasks impacts employee productivity.
- Inadequate Workforce. Internal back-office support frequently necessitates a rigorous hiring process and ongoing training.
- Insufficient Infrastructure. High-quality systems, structures, and facilities are expensive to buy and install and may require professional expertise.
Why Do Businesses Outsource Back Office Services?
Because back-office functions do not require interaction with various clients, outsourcing your services to any part of the world is an excellent option. Back-office outsourcing is as effective as hiring internal employees but at a lower cost.
According to a Deloitte survey, roughly 80% of companies worldwide find outsourcing back office a positive experience. According to the same survey, these companies’ internal teams were able to focus more on their core operations. Outsourcing as a strategy enabled them to solve capacity issues and improve overall business performance.
Your time as a business owner is precious. Working with reputable back-office outsourcing services will relieve you of the burden of personally screening back-office personnel. Outsourcing your back office reduces wage costs and eliminates other expenses such as office space allocation and the purchase of new equipment. For example, instead of purchasing new units for additional IT support, you can collaborate with an outsourcing firm and pay a fixed operational cost. 34% of businesses would prefer to outsource tech and IT support rather than spend money on equipment not available internally.
The Benefits of Back Office Outsourcing Services
Outsourcing back-office operations has been an excellent option for businesses seeking to increase profits and productivity. From small to medium-sized businesses to multinational corporations, many businesses now outsource certain operations, mainly back office operations. When done correctly, there are numerous advantages to using back-office outsourcing services. Here are a few of the most notable benefits:
A strong back-office outsourcing service provider will enable your company to grow in size, productivity, or profit. The success of your business is directly proportional to the success of your outsourcing partner. In some cases, the outsourcing firm will also handle the recruitment and training processes, providing better support to the hiring company.
2. Cost Effectiveness
Back-office outsourcing is more cost-effective than supporting back-office teams in-house. Outsourced teams oversee the equipment, infrastructure, recruitment, training, and other associated costs and tasks.
3. Access to Cutting-Edge Technology and Expertise
Another significant benefit of back-office outsourcing is that businesses can access skilled agents, industry professionals, cutting-edge technology, and first-rate services. Apart from providing back-office support, outsourcing companies emphasize access to the latest technologies and educate their employees on how to use these technologies so that they can complete tasks as needed.
4. Greater emphasis on core business activities
Outsourcing back-office functions such as HR management, data entry, IT services, payroll, and the like relieves internal employees of significant work, resulting in increased productivity. Businesses can allocate these resources more effectively, increasing sales and revenue.
5. Time Zone Difference
Some companies have customers from all over the world. Companies in this category will find that outsourcing certain back-office functions and customer care keeps business operations running smoothly. It is your responsibility as a business to look after your clients and your primary business model to expand your footprints in the international market. Off-shore outsourcing firms come to your aid as your company enters a foreign market.
6. Reduced Corporate Overhead
One of the most significant advantages of back-office outsourcing is reducing corporate overhead. Companies can save 30% to 40% on operating costs by not hiring additional employees or integrating infrastructure for back-office functions. They also have more time to devote to core business operations.
7. Reinvest in your company
Your budgeting will reveal the true value of outsourcing. Not having to spend resources on internal teams opens up many opportunities for reinvestment. Suppose you’re thinking about scaling up your organization. In that case, back-office outsourcing can provide much-needed flexibility, allowing you to work toward your business goals through more amplified investments and achieve them faster. This can also be used as a quick remediation buffer, and you can hire more talented employees in your internal departments to strengthen your core business operations. With back-office outsourcing, the ball is still in your court.
8. Remain in Control Within a Competitive Market
Every day, the global market becomes more competitive. This is primarily due to the importance of new technologies in today’s ever-changing business environment. This motivates businesses to cut costs wherever and however they can.
Most business owners are unwilling to relinquish control over these functions. However, you can retain control over how and when you use outsourced functions.
Before outsourcing your back office, you should know precisely what you want to achieve. Do you want to expand your company? Do you want to take your company to international markets? Consider your answers to these questions as you select an outsourcing firm. You’ll want to work with someone who will be there for you as your needs change and grow.
Disadvantages of Back Office Outsourcing Services
Even if you outsource your back-office functions to a company that can meet your needs, this option has its own challenges and disadvantages. Before making a decision, it is critical to understand how this arrangement works and its benefits and drawbacks. The following are some of the most common concerns among business owners regarding back-office outsourcing services:
1. Inadequate Attention
Remember to be cautious as you research available back-office outsourcing services. Make sure that the firm you choose is tailored to your specific requirements. Businesses that need to maintain proactive and open communication with their outsourcing partners frequently receive subpar service. As a result, failing to pay adequate attention to the outsourcing firm may result in client loss and decreased profit.
2. Language and cultural barriers
Off-shore business process outsourcing (BPO) firms typically provide back-office outsourcing services. Many businesses choose off-shoring over domestically available firms for reasons such as affordability and customer base. Check if your vendor provides 24-hour support to take care of your customers and back office efficiently. Another important aspect of communication is language. So, opt for off-shore outsourcing firms that minimize the language barrier as much as possible.
3. Quality Control Difficulties
When a company outsources its back-office functions to an outsourcing firm, it immediately loses control of those operations. It is critical to monitor the third-party provider. Examine whether they are completing their tasks diligently and following the agreed-upon quality standards. Sometimes agencies fail to meet the hiring company’s expectations, resulting in a drop in productivity and a significant drop in business.
4. Data Security
Allowing an external service provider to control a company’s internal operations frequently necessitates providing the provider with sensitive information. Data security is one of the most pressing concerns for businesses that outsource back-office functions because they no longer have complete control over sensitive information. As a result, it’s critical to review the service provider’s security measures to ensure they’re using the best, most up-to-date safeguards to protect your data.
5. Time Differences Can Influence Service Hours
Finishing work remotely with a time difference, no matter how small, can be difficult. This is especially true if you are outsourcing to a foreign country with a significant time difference. Interruptions in business are unavoidable and can cause frustration.
However, many BPO firms are willing to work on shifting schedules to accommodate yours. For example, companies in countries such as the Philippines are willing to schedule graveyard shifts to serve US customers, early morning shifts for Australian customers, and mid-day shifts for European clients. Finally, you must choose an outsourcing partner who is adaptable enough to meet your requirements and has a proven track record of open communication in case of a work disruption.
Regardless of the disadvantages of back-office outsourcing services, do not let them deter you from outsourcing your non-core activities. The key is finding an outsourcing firm that fits your needs and business model.
How Much Does Back Office Outsourcing Cost?
When businesses decide to outsource back-office services, they frequently compare costs and services. This comparison often only looks at the outsourcing service fee versus the salary cost of accounts staff, which does not accurately represent the company’s cost savings. Analyzing all expenses and the difference in services is the correct way to calculate the savings from outsourcing.
The following is a comprehensive list of costs when deciding on back-office outsourcing services.
1. Complete Salary Cost (Not Just Base Salary)
When calculating the total salary of in-house employees, consider their base salary, benefits, and training costs. Consider redundancy costs as well as pay instead of notice.
2. Office Space
The space can be used for accounting data storage or filing. You can find a much better use for the office space by examining the amount of space hiring internal employees would take up and the additional revenue that could be generated by shifting it to outsourced agents.
3. Printing and Stationery
If the back office is handled internally, there will always be additional stationery, postage, and printing costs. Even though most tasks are now completed using a paperless office system, office supplies will continue to be an expense for the company.
4. Costs of Hardware and Software
Most back-office processes, mainly accounting and bookkeeping, are performed on a computer, frequently requiring specialized applications or software. These bookkeeping services are not inexpensive. As your company grows, more complex software will be required to perform back-office functions such as producing VAT returns and managing year-end accounts. When calculating total computer costs, you should also factor in additional costs for printers, scanners, and photocopiers. These infrastructures not only take up a lot of office space, but they are also costly to maintain.
5. Telephone Cost
Internal back offices and outsourced accounts may incur similar phone costs because they must communicate with customers, banks, finance companies, candidates, suppliers, etc. If the back office is handled internally, the cost of telephone bills will be affected.
6. HR and Contingency Cost
HR and contingency costs are frequently overlooked when comparing costs vs. services. This applies when your internal back-office staff is unavailable for whatever reason. It could be due to vacation, illness, maternity or paternity leave. It could also be because the office is closed due to power outages, inclement weather, or other factors. These will also have an impact on contingency expenses. Outsourcing the back office will save you money by avoiding the abovementioned costs.
7. Fees for Consultation
Many businesses will look for consultants and experts to provide some of the required services if internal employees lack the necessary expertise. This can include handling tax returns and year-end accounts, product management, and other bookkeeping services. However, by outsourcing, you can save money on these consultants by delegating the tasks that must be completed to the outsourcing team.
Once these costs have been calculated and the services identified, you will better understand what you require and how much you can expect to save. Also, consider dispersing the outsourced team across multiple companies or consolidating them all under a single outsourcing firm that can handle everything. Finally, it is critical to understand what you require from your outsourcing partner to avoid incurring the exact costs as before outsourcing.
Outsourcing back-office functions can be highly beneficial to your company and its employees. You can expect to improve processes, save money, gain access to new resources, and collaborate with experts. However, an outsourcing partnership necessitates careful consideration. As with any business relationship, there will be benefits and drawbacks. The most important thing you can do is stay involved, ensure compliance, and plan for potential setbacks.
Back-office outsourcing is a continuous procedure. It requires ongoing supervision and performance monitoring. Maintain open lines of communication and create a positive working environment with your chosen outsourcing firm. Working together and communicating effectively with your outsourcing provider will ensure maximum efficiency, productivity, value for money, and satisfaction.
Want to learn more about effectively outsourcing back-office tasks? Contact Bestarion for assistance in getting started.