Back office

What it means

The back office is the part of a company the customer never sees: bookkeeping, payroll, invoicing, contract records, IT, document handling. It brings in no revenue directly, yet without it revenue cannot be billed, paid out or reported.

Its counterpart is the front office - sales, support, everything facing the client. The line between them is organisational, not qualitative: a back-office error reaches the customer just as fast as a sales one.

The back office is not the same as a shared services centre. The back office is a function every company has, even one with two employees. A shared services centre is the way a group of companies pulls that function into one place and supplies it to its members at an internal price. For a small firm the equivalent is an outside provider.

How it works in practice

The back office is what most often goes out of house. Outsourcing bookkeeping and payroll pays off where the volume does not justify a full-time specialist but the statutory responsibility is the same as in a large company.

For a handed-over function to work it needs a workflow and written procedures (SOPs): who sends documents, by when, in what format, and who approves payments. Without that, outsourcing turns into chasing people by e-mail.

When we take over the work, we first write down who issues invoices today, who approves purchases and where the documents end up. That produces a simple process map showing where work is done twice and where nobody does it. Only then is it decided what stays in the company and what moves to us.

What to watch out for

The usual mistake is judging the back office on cost alone. Cheap payroll that files late costs more in penalties and in the director’s time than the price difference ever saved. What is worth measuring is deadlines met and errors made, not the hourly rate.

The second mistake is a back office with no cover. When one assistant holds everything and falls ill or leaves, the company does not know where the passwords are, which invoices are paid or when the next filing is due. Written instructions, a deputy and permissions set through access control cost less than a month of firefighting.