Outsourcing Your Back Office Tasks and Its Top 5 Benefits to Your Business

Back-office operations include tasks associated with administration, accounting, record keeping, etc. Notably, the efficient running of these tasks is essential for the seamless functioning of any enterprise. Some companies pool focus and major resources into client-facing activities and end up neglecting the state of non-client-facing activities as a result.

For example, in 2014, the major car rental company Hertz uncovered nearly $46.3 million worth of errors in its 2011 financial records. The erroneous records were inclusive of an extensive range of company activities like uncollectible fees for damaged vehicles and restoration results. The resultant effect was that the company’s stock price dropped by 9% on the news.

This illustrates why a company needs a robustly functioning back office.

Why choose Back Office Outsourcing? 

There are many benefits to outsourcing back-office activities. A review published in the International Journal of Research Publication and Reviews (IJRPR) concluded that back office outsourcing could help in revenue management and the development of products at the fore. It also notes the plight of financial institutions as they continue to struggle with costs, capital adequacy, and investment returns for their shareholders. The review acknowledges that outsourcing can be an effective tool in mitigating pitfalls for the banking sector.

Each enterprise has tailored back-office needs as they aim to reach their core targets. Outsourcing these processes can have immediate benefits.

1. Redirection of resources

Maintenance of non-client-facing departments like accounting, stock keeping, record keeping, and administration work is both labor and investment intensive. The company is required to allocate capital for salaries and infrastructure if it seeks to run these activities in-house. The adage to these investments includes provisions for healthcare benefits and provident funds. Outsourcing helps reduce the financial strain and attention these activities would usually require. It frees up resources to be invested in core areas like production, sales, marketing, etc.

2. Increase in productivity

An ineffective or overly taxed back office can hinder the level of productivity an enterprise can achieve. If the workforce is incompetent, it translates into needless costs and losses. Further, it hinders the relocation of company assets and capital and affects the overall performance of staff. Opting for business process outsourcing can alleviate the strain put on productivity, for there are many competing services that effectively provide seamless back-office support. To support this, a research article in the European Journal of Business and Management (volume 13, issue no.6) observes that immediate and long-term benefits of outsourcing have been brought to the fore since the pandemic. The article adds that engaging in Back Processes Outsourcing (BPO) allows organizations to work with teams of skilled professionals without having to shell out the expenses while improving their productivity.

3. Focusing on strategies and critical missions

If a business chooses to delegate its noncritical activities to an outsourcing company, it can eliminate eventualities such as dealing with quality of work and backlogs. This will free up a considerable amount of time and attention, allowing for it to be reinvested in goals and growth strategies.

4. Reduction in operational costs

The survival of a business also relies on its operational costs. It costs companies significant capital to perform back-office tasks, and with the infrastructure requirements and maintenance, overall expenditure increases. This could hinder essential processes like company expansion, product planning, or investment in reinvention. Outsourcing cost-intensive tasks can significantly reduce the amount spent on non-core activities. An example of such change is the IT giant Google. The ever-expanding company outsourced to India in the year 2016. Later, it signed a deal with Cognizant for IT services. Google has continued to outsource its non-core activities, effectively reducing in-house operational costs.

5. Increase in flexibility

Over time, compares may find that they need to invest in updating back-office processes to keep in line with their consumer demands. The upgrade would require significant attention, time, and resources in the form of training of staff, replacement of redundant technology, bettering existing infrastructure, etc. Outsourcing can eliminate the need to spend on an upgrade, thus providing flexibility in using returns to either grow the business, create financial buffers, or in research and development. Moreover, the flexibility provided can refocus an enterprise into developing growth strategies.

Where should you look for an outsourcing partner? 

A publication by Lacity M., Willcocks L. predicted that the global BPO market would be US$140 billion, of which US$17 billion will be outsourced to India. The Indian market has an array of enterprises that provide business process outsourcing. Ventures like Maxicus boast of robust services that are backed by client-driven case studies, which have shown significant benefits.

Understandably, a company may hesitate to outsource its back-office tasks owing to concerns related to pricing, affordability, staff talent, and privacy. But since the competitive market provides a range of services to choose and bid on, these concerns can easily be done away with by finding tested providers. This is to say, every business needs to find their ‘glass slipper’—a service that is tailored to your company’s needs while being trustworthy, maintaining data confidentiality, and most importantly, delivering on efficiency.

Given the uncertainty caused by the Covid-19 pandemic, the use of outsourcing services can help companies weather the storm.
As the trend indicates, the outsourcing market is set to grow and improve, providing the sweet spot for businesses to take the plunge and employ BPO service providers, thus reaping immediate and long-term benefits.