Definition

Back Office

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What is the back office?

The portion of the company that supports personnel and administration makes up the back office. The back office does not deal with the clients and their major functions include clearances, settlements, regulatory compliances, record maintenance, technology related services and the accounting team.

For example, a financial company is structured into three categories, front office, middle office, and the back office. The front office includes the marketing, sales, and customer support teams.  The middle office deals with the risk management of the firm and the back office constitutes the support and administrative services.

Summary
  • The portion of the company that support personnel and administration makes up the back office.
  • The back office does not deal with the clients.
  • Their major functions include clearances, settlements, regulatory compliances, record maintenance, technology related services and accounting.

Frequently Asked Questions (FAQs)

What is the role of back office executives?

The main role of the back-end executives is to provide managerial and administrative support to the front and middle offices of the company. The executives do not interact with the clients but ensure that the company runs smoothly, and the client and company’s interaction is productive for the organisation. The key administrative duties are performed along with the data analysis, accounting functions and market research or product research.

How does the back office function?

Back offices are that part of an organisation that is responsible for performing all the operations related functions. They are not visible to the client, but they are an essential part of the organisation which ensures smooth functioning of all the departments. The job titles of back office executives are generally categorised under operations. They are responsible for equipping and enabling the front offices to perform their duties which involves client facing. All the jobs which do not directly generate income for the company are categorised as back office, but without them, the revenue cannot be generated. For example, if a company does not have any information technology maintenance team, the company will face issues in ensuring the smooth functioning of the information technology infrastructure and the revenue will be affected significantly.

How did back offices originate?

“Back office” originated as a term when the early companies designed a map of their offices. The front portion of the company was dedicated to the team that deals directly with the clients or customers, whereas the backside of the office was occupied with the people who do not interact with customers and provide facilities to the front office to perform their functions efficiently.

What is the importance of back office?

The back office can be considered as the backbone of a company as it is responsible for playing some important roles and pushing the company towards success. Back offices boost the productivity of the company and aim to keep the cost of operations low. They also help in reducing the costs that occur due to the non-availability of resources on time. Back offices have gained significant attention in recent times as they are responsible for securing and maintaining the company’s information and data. This function is crucial for business operations, process and tracking the company’s performance as well.

Moreover, back offices also help in identifying the areas where improvement is required as the research team is also part of the back office. Lastly, back offices allocate the company’s resources which in effect control the company’s cost.

Here are some of the back office roles-

  • Financial assistance
  • Human resource assistance
  • Staff accountant
  • Information technology specialist
  • Security manager
  • Data analyst
  • Compliance officer
  • Financial analyst
  • Risk analyst
  • Operational manager

Example of back office

In the present business market, the back offices are situated far away from the headquarters. As the company wants to save the back office costs, they are in regions where the labour cost is low, the commercial lease is not expensive, skilled labour is available and adequate labour is easily available.

Alternatively, companies also outsource the back office services which further reduce their cost. Moreover, the companies appoint the back office executives on a contractual basis. With the technology advancement, it has become affordable for the companies to avail the services from remote locations, and the executives deliver their services from home only. The work from home arrangement saves cost in terms of rent and the overall productivity is increased. Additionally, the company has the access to a large pool of talent from all the remote locations and hire personnel at a lower cost.

Many firms offer incentives to the applicants who are ready to undertake the role from a remote location. For example, a firm can hire a compliance officer along with the $500 housing subsidy per month. If the company must pay $1000 per month for office space for an individual employee, then the company will be able to save $500 each month by using work from home arrangement. The cost saved can be multiplied with the increase in several employees.

What is the relation between back office and the front office?

The back office has no direct interaction with the customers or client, but they interact with the front office staff actively. For example, in a retail company, the front office sales executive will establish contact with the inventory back office department regarding updating the company’s inventory or with the accounting department to check the prices of the products offered to customers. Similarly, majority of the IT professional of the company maintains communication with all the departments to ensure smooth functioning of the IT infrastructure. Furthermore, the human resource department must assess both the back office and front office to ensure the availability of the human resource.

What is the role of back office in the stock market?

In the broking business, back offices are the backbone. In the dynamic and risky business environment, the back offices ensure that the firm complies with all the regulations and rules and maintain the operations of a firm.