What Are Outsourcing Back Office Services?

Back office services refer to any non-client-facing administrative or support tasks. This can include human resources, data management, compliance and risk management, and more.

Some small and medium enterprises and startups outsource their back office needs like payroll, accounting, tax compliance, and more. As a result, global spending on outsourcing is expected to hit $731 billion in 2023.

Professionals behind the laptop working in a back office company
68% of companies in the US outsource their services

What Do Back Office Companies Do?

While back office outsourcing services are non-client-facing, they are integral in streamlining and improving your business's customer experience. You can outsource them to save time, money, and energy.

Some of the outsourcing back office services that service providers offer are:

Service #1: Claims Processing

Often used in insurance-related tasks, claims processing includes a complex workflow of managing claims once a client makes a formal request. This involves processing many documentary requirements, ensuring compliance, and following up on the policy provider.

Instead of making your employees spend their time in the complex claims management process, let your back office service provider do it for you.

Service #2: Collection

Often used by banks and money lending companies, collectors are responsible for recovering past-due funds. Like claims processing, collecting from a default account requires multiple follow-ups with a borrower.

Instead of bogging down your employees in collecting your receivables, you can outsource it to a back office company that also provide collection services. Let them handle your collection while your employees focus on providing excellent customer service.

Service #3: Accounting

Accounting includes managing your business's finances and ensuring tax compliance. Ensuring that your accounting books are updated can take time and effort. As such, it is often recommended to outsource such business needs to credible accounting firms.

Service #4: Human Resources

Some businesses work with a back office support company to augment their human resources department. Back office support agencies that provide HR services can help you recruit, hire, and onboard employees. They are also responsible for creating and implementing company policies.

Service #5: Payroll

Although often included in human resources, some partner agencies specialize in outsourced payroll services. They focus on managing employees' compensation, including computing and depositing salaries, implementing payroll deductions, and withholding taxes.

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How Companies Can Benefit from Back Office Outsourcing Services?

Hiring back office companies allow you to focus on your business’s core competencies, thus achieving success faster. You may outsource your company's back office needs for a couple of reasons:

  • Cut overhead cost: Outsourcing eliminates the need to hire more people in your company. Instead, you can hire an outsourcing company that can handle the administrative and compliance tasks for you.
  • Focus on your core activities: Outsourcing back office services also allow you to focus on the essential parts of your business. This includes providing results to clients or bringing products to your consumers.
  • Access to talented resources: Another advantage of working with back office support companies is that they have the right professionals for your needs. No need for you to scour through hundreds of resumes to find the right talents. They can handle it for you.
  • Scalable workforce: What's great about outsourcing back office services is that you can scale the manpower you need. You can tap your partner agency to augment your human resources department or focus on their outsourced accounting services only.

That said, consider these five factors to know whether outsourcing back office services is right for you:

Factor #1: Save Time

Back office outsourcing allows you and your employees to save time. That's because you have a team of experts who handle your administrative tasks.

Instead of spending time on follow-ups, data entry, and document processing, your employees can delegate such tasks to your outsourcing team. As a result, they can focus on their core functionalities.

For instance, you run a digital marketing agency. Instead of processing your client's invoice, you can use a free time tracking tool to record the time spent rendering services. Your partner agency will then process your invoice and send it to clients for proper compensation.

Factor #2: Boost Employee Efficiency

In relation to the previous point, back office outsourcing companies allow you to boost employee efficiency. Because your in-house team no longer needs to do administrative tasks, they can focus on rendering core services to your clients. Outsourcing also allows them to serve as many clients as possible.

Factor #3: Save Resources

When hiring new employees, you must set aside a budget for their office equipment. Recruiting, hiring, and onboarding also come with costs since you spend work hours posting job vacancies, reviewing resumes, and interviewing candidates.

On the other hand, outsourcing your HR services allows you to cut up to 27.2% on operation costs. According to a 2019 National Association of Professional Employer Organizations study, companies can save as much as $272 for every $1,000 spent on outsourced HR services.

These savings can be derived from employee compensation, unemployment insurance, health benefits, and other HR-related expenses.

Factor #4: Tap Expert Service Providers

Chances are, you are not an expert in payroll management or accounting. This is where outsourcing back office services can be helpful. That's because they have the tools, skills, and knowledge needed to streamline your business's processes. This includes ensuring that your employees are paid on time, your finances are well-managed, and your legal responsibilities are met.

Factor #5: Focus on Your Business

Overall, outsourcing allows you to save time, money, and resources. With the help of a back office service provider, you can focus on the essential parts of your business.

In fact, Deloitte's Global Outsourcing Survey reveals that "enabling focus on core functions" is the most commonly perceived benefit of outsourcing. This is according to 65% of the respondents.

Core business functions include providing services to your clients and ensuring they are happy.

How Much Do Back Office Outsourcing Services Cost?

Agencies that provide outsourcing back office services can charge between $5 and $250 per hour. In addition, you may need to set aside a budget that ranges from $1,000 to $25,000 per month.

How much these specialized companies charge will depend on the number of outsourcing services they render. For example, hiring a back office company to provide HR-related services only is more affordable than a partner agency that provides you with HR and accounting services.

How To Find The Right Back Office Outsourcing Companies For Your Business?

There are plenty of companies that provide outsourcing back office services. To know which partner agency is right for you, we recommend following these steps:

Step #1: Identify Your Needs

According to Outsourced Accelerator, 68% of companies in the US outsource their services. In relation to this, IT needs is the most outsourced service. This includes IT support, wherein service providers offer assistance to businesses of all sizes.

However, it is crucial to identify your needs before hiring back office support companies. This includes knowing what specific tasks you want to outsource. For instance, your partner agency may offer web development services or database management.

Step #2: Determine Your Criteria and Qualifications

Once you have identified the back office support you need, the next step is to determine what criteria and qualifications you will use. This includes knowing the specific skills or technology you will require.

For example, some small businesses outsource their accounting needs to a service provider proficient in QuickBooks Desktop. Suppose you have an offshore team in the Philippines. In that case, you may outsource your HR needs to a company familiar with the Philippine Labor Code.

Step #3: Do an Extensive Research

Now that you know your back office needs and your required skills and expertise, your next step is making a shortlist of service providers.

You can start with our back office support agencies list and sort them based on client reviews, hourly rates, or minimum monthly budget. From there, you can create a list of potential partner agencies that can provide the services you are looking for and can suit your budget.

Step #4: Check Their Portfolio and Case Studies

In relation to the previous step, it is also helpful to check your shortlisted agencies' portfolio and case studies. This can give you an insight into the type of businesses that they serve, as well as the results that they can bring for your company.

Step #5: Conduct a Trial Service

Some back office outsourcing companies can provide trial services. They usually last for three months and are an excellent way to see how the agency will work with you. From there, you can decide whether to extend your service contract or move to another partner agency.

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10 Questions To Ask When Hiring Back Office Companies

Once you have your shortlist of companies that provide outsourcing back office services, it is crucial to know whether they are the right fit. You can do this by asking the following questions:

  1. Do you offer the specific back office service(s) we are looking for?
  2. What back office service would you recommend for our business?
  3. Do you have experience providing back office support to companies like ours?
  4. What technologies or tools do you use for such a service?
  5. How can back office outsourcing help our business?
  6. What ROIs can we expect when we hire your services?
  7. Is our outsourced team offshore or nearshore?
  8. How can we keep track of the quality and quantity of your service?
  9. Do you provide 24/7 client support service?
  10. Who will be our point of contact?

Takeaways On Outsourcing Back Office Services

There are business functions that do not require talking to your clients or customers. Nonetheless, they are as integral as your client-facing services in providing customer satisfaction.

That said, you must know how to look for the right partner agency. Asking the right questions can also help evaluate whether they are a right fit for your business.

Hiring an agency that provides outsourcing back office services can help your business save time, money, and resources. More importantly, you can focus on providing services to your clients.

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