Is Your Business Spending Too Much on Administrative Work? Here’s How Back Office Outsourcing Can Help

Administrative tasks can take up to 36% of the workweek – draining valuable time, money, and resources that could be better spent on revenue-generating activities.

These inefficiencies can severely hinder a company’s growth and, if left unchecked, even threaten its survival.

Outsourcing administrative tasks ensures smooth business operations and offers a strategic opportunity to reduce costs, streamline processes, and focus on core competencies.

In this article, we’ll explore how entrusting these critical functions to expert providers can help your business save money, effort, and time, and operate more efficiently.

I. Introduction to Back Office Outsourcing

Back office outsourcing refers to the delegation of essential, but non-customer-facing, functions to a third-party provider.

Common examples of back office tasks include:

• Accounting and bookkeeping

• Payroll processing

• Human resources administration 

• IT support

Take a mid-sized e-commerce business. The front-end team may focus on sales and customer service, while the back-end handles inventory, returns, accounting, and website maintenance. These back-end operations are essential even though customers do not engage with them directly.

Outsourcing these tasks is often a strategic decision for companies looking to take advantage of the following benefits:

• Reduce costs 

• Boost efficiency 

• Gain access to specialized skills

• Focus on core competencies and revenue-generating activities.

Outsourcing backend roles allows the company to double down on key growth areas such as customer acquisition and product development, all while ensuring administrative tasks are expertly handled.

II. BPO vs. Back Office: Clarifying Terms

While Business Process Outsourcing (BPO) and back-office outsourcing are closely related, they are not identical.

Back office outsourcing is a subset of BPO.

“BPO” is a broad term encompassing the outsourcing of any business process, whether it involves customer-facing functions (front office) or support functions (back office).

BPO covers a wider range of activities. In powerhouses like the Philippines, the sector is expected to grow 7% to $37.87 billion this year.

In a BPO set-up, a company might outsource its customer service department (a front office function) alongside its accounting and IT support (back office functions).

On the other hand, back office outsourcing typically only refers to roles that remain invisible to the customer but are integral to internal operations.

III. The Concept of Outsourcing an Office

Outsourcing an office goes beyond delegating individual tasks, but involves transferring entire functions or departments to external providers.

A U.S.-based company might outsource its entire HR or accounting department to a firm in the Philippines—which Business.com has declared as one of the top outsourcing countries globally.

Organizations like Amazon, IBM, Accenture, Teleperformance, and Concentrix are global leaders that have successfully utilized outsourcing strategies to remain competitive in their industry.

Such a move can yield numerous advantages, including:

Cost savings: Outsourcing presents a cost-effective solution for businesses looking to streamline their operations. By shifting HR functions to affordable regions such as the Philippines, companies can reduce expenses tied to recruitment, employee training, and full-time staff management. Such a decision can easily result in a 50% reduction in cost due to lower wages and overhead. With these savings, companies can invest in other activities and areas.

Strengthen core business: By outsourcing back-end tasks, companies can channel more resources to their core strengths—where they truly excel. A social media marketing agency can concentrate on content creation, client relations, and marketing strategy while delegating accounting, invoicing, and payroll to specialized service providers. By offloading back office tasks, the social media agency saw a 25% increase in productivity.

Access to specialized expertise: Businesses can offload routine, repetitive tasks to field experts. External providers often offer teams with specialized skills and expertise that may be lacking internally, helping to boost both productivity and the quality of work delivered.

Scalability and flexibility: Outsourcing enables companies to quickly adapt to changing demands. A U.S. e-commerce company, for instance, outsourced its customer service department to scale during peak holiday seasons–allowing it to handle a 50% spike in customer inquiries without the need for long-term hiring commitments–ensuring customer satisfaction.

IV. Roles and Responsibilities in Back Office BPO

Back office BPO covers a variety of essential tasks that keep a business running smoothly.

Here are some typical duties associated with back office operations:

1. Data Processing

   Data processing refers to the collection and transformation of raw data into meaningful information—for analysis, decision-making, and business value. It includes activities like:

   • Data Entry: Inputting and updating information in databases, ensuring accuracy and completeness.
   • Data Management: Organizing, storing, and retrieving data to support business activities.
   • Data Analysis: Extracting insights from data sets to inform business decisions and strategies.

2. Document Management

   Document management involves handling various types of digital and paper documents, and maintaining their accuracy and accessibility. Key responsibilities in this category include:

   • Record Keeping: Maintaining records of transactions, communications, and other important documents.
   • Document Processing: Reviewing, sorting, and filing documents for compliance and easy retrieval.
   • Content Management: Creating and managing digital content for internal and external use, including reports and presentations.

3. Transaction Processing

   Transaction processing is the systematic handling of various business transactions like sales, purchases, payments, and receipts. Its key responsibilities include:

   • Accounts Payable/Receivable: Managing incoming and outgoing payments, ensuring timely processing and accurate record-keeping.
   • Billing and Invoicing: Creating and sending invoices to clients, as well as tracking payments and outstanding balances.
   • Claims Processing: Handling claims for insurance or reimbursements, verifying the accuracy of all filings and documentation.

4. Other Key Tasks

   In addition to the core functions above, back office roles also involve:

   • Quality Assurance: Monitoring processes and outputs following established quality standards and compliance regulations.
   • IT Support: Providing timely technical assistance and support for software and hardware issues, ensuring that systems run smoothly.
   • Administrative Support: Performing various administrative tasks, such as scheduling, managing correspondence, and supporting leadership functions.
   • Compliance Management: Safeguarding processes and confirming that they adhere to legal and regulatory requirements—critical to sectors like finance and healthcare.

   Efficient management of these tasks is critical for smooth operations.

V. Back Office Jobs: Invisible but Essential

Now that we’ve seen the range of back-office roles, let’s explore how these functions, when outsourced, can provide transformative benefits.

Below is a small sample of key jobs that fall under back office operations—showcasing the variety of personalities involved behind the scenes to keep a business running smoothly.

• Data Entry Specialist: Includes entering information from paper documents or electronic sources into databases, verifying their accuracy, and correcting errors. Proficiency in typing, attention to detail, and familiarity with data management software are essential for this role.
• Document Controller: Oversees the storage and retrieval of documents within an organization—handling tasks such as document versioning, tracking changes, and providing access to authorized personnel.
• Administrative Assistant: Provides support to executives—performing a variety of tasks from managing calendars and organizing meetings, to preparing reports and handling correspondence.
• Operations Coordinator: Manages production schedules, coordinates with suppliers, and ensures that inventory levels meet demand.
• Procurement Specialist: Evaluates supplier bids, manages contracts, and ensures that goods are obtained at the best possible prices while meeting quality requirements.
• Supply Chain Coordinator: Works with suppliers and distributors to make sure products are delivered on time.
• Order Processing Clerk: Handles customer orders from receipt to fulfillment.

Each of these roles, though not directly visible to customers, plays a vital part in keeping the gears of a business turning.

But how do back office functions work alongside front office operations to create a seamless experience for the customer? Let’s take a closer look at how the two interact and support each other in real-world scenarios.

VI. Front Office & Back Office: In Action

Front office and back office teams serve distinct functions within a business. Whether a company chooses to outsource both or focus solely on the back end, here are some examples of how back office operations complement front office activities:

1. Administrative Support

   While sales associates handle customer interactions, the back office ensures the front office has the necessary information to assist efficiently. When a customer inquires about an out-of-stock product, the front office will promptly consult the back office for inventory updates and restock timelines, delivering timely details to the customer.

2. Technical Support

   Back office IT professionals maintain the functionality and security of business platforms. When front office staff face technical issues, the back office steps in with prompt support and quick resolutions, ensuring smooth and uninterrupted service.

3. Compliance and Risk Management

   Compliance officers monitor transactions and ensure that they adhere to the latest legal standards and regulations, allowing other employees to focus on competitive strategies.

4. Financial Management

   The front office handles client interactions, while the back office takes care of the transaction.

   In a trading platform, the back office handles settlements and record keeping. When a client executes a trade, the back office confirms the details, processes the transaction, and checks that all regulatory requirements are met.

Without strong back-end support, front-end services suffer and struggle to deliver the outcomes customers have come to expect.

So while back office tasks may be routine, time-consuming, and not directly tied to revenue generation or customer interactions, they bolster the business through:

• Enhanced operational efficiency: A strong back office streamlines workflows, reduces errors, and increases productivity—leading to overall efficiency.
• Better decision-making: Accurate and timely data provides valuable insights for leaders, enabling them to make informed decisions and develop effective strategies.
• Improved customer experience: A non-customer-facing operation can invite customer loyalty by ensuring quick service delivery and a smooth customer experience.
• Compliance and regulatory adherence: Back office work ensures that organizations comply with relevant laws, regulations, and industry standards, such as accounting principles (GAAP or IFRS) and data protection requirements—insulating the company from future legal risks.

As we’ve seen, front and back office teams work in tandem to ensure a business runs smoothly. Without the dedicated support of back office staff, front office employees would be hard-pressed to maintain the level of service customers expect.

Now, let’s explore why outsourcing back office operations to specialized providers can enhance these functions even further.

We’ve seen the benefits of strong back-end support. Let’s now do a deep dive into the transformative benefits of outsourcing these operations to expert service providers.

VII. 10 Business Challenges Solved By Outsourcing Back Office Jobs

1. High Operational Costs

   Problem: Rising costs for in-house staff, particularly for administrative roles, is one of the most pressing challenges faced by business owners.Maintaining an in-house team involves significant expenses, including salaries, benefits, office space, utilities, and training. Administrative roles are essential for day-to-day operations, but often do not directly contribute to revenue generation. The ongoing financial burden can make it difficult for businesses to remain competitive, particularly in markets with high labor costs.

   Question:“How can I reduce my operational expenses without compromising on quality?”

   Solution: Outsourcing back office functions is a practical and effective solution to reducing operational costs without sacrificing quality. Offshore outsourcing destinations, like the Philippines, offer highly skilled labor at a fraction of the cost compared to developed countries. This means companies can achieve the same, if not better, quality of work at significantly lower price points.

   Technical support staff earning $ 45,039 annually, will only cost $ 19,700 in the Philippines—a savings of 56%.

   In addition to lower wages, outsourcing allows businesses to save on more fronts:

   • Savings on Infrastructure: Outsourcing eliminates the need to maintain physical office space, equipment, or other facilities—saving on rent, utilities, and office supplies.
   • Independent Contracting: Outsourcing eliminates the need to pay for benefits like health insurance, retirement plans, and paid leave, which are typical costs for in-house staff.

2. Time-Consuming Administrative Tasks

   Problem: Routine tasks like data entry and payroll, often consume valuable time and resources that could otherwise be dedicated to core business. For start-ups, the ability to focus on revenue-generating initiatives could spell the difference between failure and success.

   Question:“How can I focus more on core activities and less on time-consuming administrative work?”

   Solution: Routine tasks like payroll and data entry can be performed just as effectively by outsourced professionals. Outsourcing back-office administrative tasks frees up valuable time for strategic, high-value activities.

   By handing off these routine tasks to a third-party provider, businesses can focus on expanding their market share, enhancing product offerings, or improving customer engagement.

3. Difficulty Scaling Operations

   Problem: Expanding an in-house team requires substantial investments in recruitment, training, office space, and technology. Furthermore, local talent pools may be limited, and in competitive markets, hiring skilled professionals often comes at a premium.These constraints slow down a company’s growth, as the ability to scale becomes bottlenecked by the time and capital needed to hire new employees.

   Question:“How can I scale my operations without major capital investments?”

   Solution: Outsourcing provides a highly flexible and cost-effective solution to the scaling challenge. By partnering with an established provider, businesses can quickly and efficiently increase or decrease their back office workforce without being tied to long-term commitments or excessive overhead.

   Providers often have access to large pools of skilled professionals in regions with lower labor costs, enabling companies to quickly ramp up with a highly trained staff.

4. Talent Shortages

   Problem: Finding skilled back office personnel can be a daunting challenge, especially in highly competitive markets where talent is scarce.

   Recruitment can become lengthy and costly, and businesses may end up settling for candidates who are underqualified or overpaid due to limited local options. It can lead to inefficiencies, errors, and stalled growth as the business lacks the workforce required to perform essential functions effectively.

   Question:“How can I find skilled professionals to handle my back office needs?”

   Solution: Outsourcing gives businesses access to a global talent pool. Countries like the Philippines have emerged as major outsourcing hubs, offering a deep reservoir of highly skilled professionals trained in a wide range of roles.

   The Philippines has a workforce of highly educated and English-speaking professionals skilled in a variety of back office roles such as IT, finance, customer support, and HR. These professionals are often trained in globally recognized standards, maintaining high-quality output.

   According to global firm JLL, more Filipino remote professionals are set to join in the coming years.

   

   Partners often provide professionals who are not only skilled in back office tasks but also have niche expertise that may be hard to find locally. For instance, if a business needs specialized IT support for data intelligence or cybersecurity, providers can connect them with professionals with critical skills.

5. Need for 24/7 Operations

   Problem: Maintaining a 24/7 operation using in-house staff can be expensive and complex. Multiple shifts require significant staffing— including overtime pay, benefits, and additional management layers. Moreover, the challenge of finding employees willing to work odd hours or weekends often compounds the issue.

   Question:“How can I provide 24/7 support without increasing costs significantly?”

   Solution: Offshore outsourcing is the most cost-efficient way to meet the need for 24/7 operations. By outsourcing to regions in different time zones, companies can ensure uninterrupted service coverage without the need to hire and manage multiple shifts internally. Offshore teams can take over operations when the company’s local staff is off-duty, effectively extending operating hours without extra costs for night shifts or overtime pay.

6. Compliance and Data Security

   Problem: Companies that handle sensitive customer or financial information face a myriad of complex regulations such as the General Data Protection Regulation (GDPR) in the EU or the Health Insurance Portability and Accountability Act (HIPAA) in the U.S.Ensuring that all data is handled securely and in compliance with these laws is not only challenging but also resource-intensive.

   Question:“How can I ensure compliance and secure my data while outsourcing?”

   Solution: Reputable outsourcing providers are well-versed in global compliance and data security standards. They offer robust protocols to ensure that data is stored, processed, and transferred securely.

   In many cases, these providers invest heavily in cybersecurity measures and legal compliance certifications, which are far more advanced than what individual businesses can manage on their own.

   By outsourcing back-office tasks to experienced providers, companies can benefit from these enhanced security measures and ensure compliance with the necessary regulations.

7. Slow Processes and Lack of Efficiency

   Problem: Many businesses struggle with inefficiencies in their internal back office operations. These inefficiencies result from outdated systems, faulty manual workflows, or poorly trained staff.When tasks such as payroll, data entry, or inventory management are slow or riddled with errors, overall productivity is hindered—delaying important decision-making and affecting the company’s ability to respond to market changes.

   Question:“How can I improve the efficiency of my back-office functions?”

   Solution: Outsourcing offers businesses access to providers who specialize in optimizing back office processes. These providers bring industry expertise, streamlined workflows, and advanced technology to improve productivity and reduce bottlenecks.

   Businesses can take advantage of faster turnaround times, improved accuracy, and access to cutting-edge tools without needing to make large internal investments.

8. Limited Access to Technology

   Problem: Small and mid-sized businesses frequently face budget constraints when it comes to the latest technology—struggling to purchase, implement, and maintain cutting-edge tools. This lack of access to advanced software systems can slow down processes and prevent the “little guy” from competing with larger, tech-savvy competitors.

   Question:“How can I leverage advanced tools and technologies without major investments?”

   Solution: Service providers typically invest in advanced tools and platforms to support their clients’ needs—including automated accounting software, sophisticated data management systems, and modern IT infrastructure.

   By tapping these providers, businesses can benefit from state-of-the-art technologies that improve efficiency, accuracy, and scalability.

9. High Turnover Rates

   Problem: Retaining staff can be a persistent challenge for businesses. High turnover rates not only disrupt workflow but also increase costs from recruiting, onboarding, and training new staff. This instability can reduce the overall efficiency and distract from core business goals.

   Question:“How can I maintain a stable workforce for back-office functions?”

   Solution: Outsourcing back office operations to regions like the Philippines helps solve the problem of high turnover rates. By offering competitive salaries, benefits, and career development opportunities, outsourcing providers in these regions typically have more stable workforces.

10. Difficulty Meeting Growth Demands

    Problem: As businesses expand, they often encounter the challenge of meeting increasing operational demands without sacrificing quality or efficiency. Scaling in-house teams to handle this growth can be time-consuming, expensive, and resource-draining. It can put a strain on existing resources and slow down progress.

    Question:“How can I meet growing operational demands without stretching my in-house resources too thin?”

    Solution: Companies can leverage the flexibility of outsourcing partners equipped to scale operations as needed. Service providers can quickly allocate resources to handle increased workloads, allowing businesses to focus on expansion without the administrative burden of growing their internal teams or investing in new equipment or floor space.

    Outsourcing back office functions is more than just a cost-saving measure. It’s a game-changing strategy that allows companies to stay ahead of the curve. By leveraging the expertise and resources of established service providers, businesses can unlock new levels of productivity and profitability.

Kinetic Innovative Staffing provides businesses with back office outsourcing solutions tailored to their unique needs.

With access to a vast candidate pool of over 4 million professionals, Kinetic can effectively fill a wide range of back office roles including virtual assistants, accountants, paralegals, and data entry specialists.

Outsourcing back office operations leads to a 70% reduction in labor costs, while still maintaining high-quality service.

If you’re interested in leveraging the benefits of back office outsourcing, don’t hesitate to reach out and we’ll provide the support you need.

Kinetic Innovative Staffing has been providing hundreds of companies in the Asia Pacific, North America, the Middle East, and Europe with professionals working remotely from the Philippines since 2013. Get in touch to know more.