Written by Allie Delos Santos
Your back office is a cost center. It doesn’t directly generate revenue for your company and often contributes to costs. Back-office tasks can also be cumbersome and repetitive, resulting in a high turnover rate in this department.
Companies can solve the growing problem in the back office by outsourcing it. Back office outsourcing services provide many benefits, such as cost savings, improved workflow, and increased productivity.
In this article, we’ll go through the steps in outsourcing back-office activities, the factors you need to consider when choosing a provider, and the functions you can consider subcontracting.
What Does Outsourcing Back-office Services Entail?
Outsourcing back-office is the process of delegating non-core business functions to an external third-party provider specializing in managing such duties.
According to Shared Services and Outsourcing Network (SSON), large companies lose $480 billion annually due to ineffective back-office processes. Factors responsible for this include
- ever-increasing workload,
- difficulty achieving service goals and timelines, and
- challenges that business leaders face.
Moreover, developing a back-office operation tends to be expensive due to the cost of essential tools and other technological resources.
Throughout the years, outsourcing back-office services in countries with lower labor costs have grown. For example, over 1,000 business process outsourcing (BPO) companies hired 1.3 million Filipino workers three years ago, which has increased by 8 to 10% each year. The Philippines now holds roughly 10 to 15% of the global BPO market.
Outsourcing back-office services to BPO companies is one of the most common solutions to addressing inefficiencies in larger companies. Even small to mid-size businesses are now reaping the benefits of back-office outsourcing.
Discover the 5 Easy Tips for Back Office Outsourcing
What Are the Benefits of Outsourcing Back-office Services?
Businesses across all industries and sizes realize a significant increase in the time and resources saved with back-office outsourcing. But their requirements differ depending on a company’s size and sector.
Here’s a non-exhaustive list of the benefits of back-office outsourcing:
1. Time and Cost Efficiency
As mentioned earlier, back-office services tend to be expensive due to overhead expenses of tools, facilities, and technological resources such as software and other programs. These costs can affect the growth of a business.
Fortunately, outsourcing back-office services brings both time and cost savings. BPO companies have the necessary equipment and software. They can take care of recruitment and training or the entire hiring process. That way, you can save on expensive resources.
2. Access to Industry Experts
Outsourcing back-office functions to BPO vendors provide you with access to highly skilled employees. These agents can deliver quality services. They are trained workers who can use the most up-to-date technological resources and know how to use the tools required for their industry.
This is possible because many BPO companies retain competitiveness by hiring highly qualified people for specific roles and providing continuous in-house seminars and training.
3. Focus on the Core Business
Outsourcing back-office services enable you to pay all your attention to primary business functions. As you concentrate on the core competencies of your business, your external team provides you with the back-office support you need.
As your company grows, your outsourcing partner can take care of the hiring and training of new employees to accommodate your growing back-office activities. And remember: outsourced back-office services work contractually, so your organization can scale up or down when needed.
Aside from the benefits mentioned above, the advantages are even more significant if a company outsources its back-office tasks to BPO companies in the Philippines. The Philippines has a flourishing BPO industry even in times of crisis.
The Philippines has seen the largest market share in offshore outsourcing since 2013, which makes it the perfect option for companies wanting to outsource their back-office services.
When the demand rises, back office outsourcing enables you to quickly expand your capacity without needing to lease a bigger space, add new office equipment, or formally recruit new employees.
What Back-office Functions Can a Company Outsource?
With the attractive benefits of offshore back-office outsourcing, many companies now outsource back-office functions. Below are the typical back-office services that companies outsource nowadays:
Accounting and Finance
Research shows that global Financial Services Outsourcing is estimated to be worth 130 Billion dollars in 2021 and is expected to grow at 7.5% yearly.
Factors that contribute to this growth include access to global talents, savings in acquiring expensive accounting software and infrastructure, and minimizes the effort spent recruiting and training new hires.
For small to medium-sized businesses whose focus is not on financial activities, outsourcing allows them to concentrate on their expertise while ensuring that experts handle all accounting processes.
When you outsource accounting processes, you are guaranteed that professionals will handle your books, organize them for eary referencing when analyzing cash flow and receive a comprehensive report you can use to make informed financial decisions.
IT Help Desk
Information technology (IT) is a significant portion of the BPO industry. This is entirely understandable since IT is an altogether different ball game. And because of cyber-threats, ransomware, privacy issues, and the need for tight security, you don’t want to skimp on this service.
Outsourced IT offers you, among other things, excellent support and effective online security measures created and maintained by experts in the field.
If your goal is to have the best candidates entering your company, the first thing you need is an excellent recruiter on your side. But an internal human resource (HR) department can be expensive to run.
Luckily, outsourced HR delivers both outstanding and affordable results. Highly competent HR specialists can offer various services, from recruitment and training to benefits administration. That’s a lot of administrative activities off your shoulder.
This role consists of obtaining data stored in various mediums and entering them into a computer system via a data entry interface located in another medium. Put, data entry is the process of copying and pasting data from one source to the target system.
The complicated part happens when the coder needs to research or interpret the data before copying and pasting it or when the coder applies business rules to the data before entering it into the system.
Outsourcing data entry activities allows your company to work more efficiently and focus on more business management than menial data extraction and entry.
Calculation errors are prone to happen with payroll, especially when the payroll officer lacks expertise. The lack of concentration is also another reason behind mistakes.
The good thing about outsourced payroll is that external staff undergo extensive training to become well-versed in payroll practices. Outsourcing this back-office function allows you to avoid payroll processing errors and prevent mistakes.
Payroll is one of those activities that take a long time to finish. Managing payroll involves many tasks, including identifying tax payments, preparing checks, and generating management reports.
Outsourcing payroll may help companies save both money and time. Not wasting time on repetitive payroll activities allows companies to concentrate on business growth opportunities.
What Back-office Functions Can’t a Company Outsource?
Outsourcing back-office functions is beneficial for plenty of reasons. But there are certain aspects of your business that you must never outsource.
A crucial part of creating an effective outsourcing plan is figuring out where your organization excels and your competitive advantage. Figure out your edge and core competencies and then manage them in-house. Outsourcing is always a business strategy and is not suitable for every company. Find the processes you need help with and keep the ones you excel in in-house.
It’s incredibly uncomfortable to watch strangers terminate your employees. And various federal, state, and local laws must often be followed during a termination process. While some companies provide this kind of service, you may want to keep this in-house, though asking a third party’s counsel and advice for outplacement and assessment is acceptable.
Nobody knows your employees better than you do. While outsourcing companies can help, it is best to keep employee development in-house. After all, the future of your workforce lies with you, and you must take your time to develop your employees.
Tasks You Don’t Understand
At this moment, there may be plenty of tasks you want to outsource, such as customer relationship management (CRM) and web development. Although you can always outsource these tasks, if you know close to nothing about how they work, you might invest in something you’ll want to replace as soon as possible.
How Do I Choose an Outsourcing Solution That Works?
When choosing a back-office solution, be clear and practical about your goals and what you want your third-party vendor to accomplish with you.
Since a plethora of outsourcing services available on the market offer various proposals, here are some tips to guide you through choosing a partner that fits your needs.
Look for an outsourcing company that has the same values as yours. Their culture and way of doing business should align with yours. Partnering with a vendor that meets your requirements and exceeds your expectations is also crucial.
Make sure that their strength does not begin and end with being cost-efficient. They need to deliver exceptional service. Lastly, working with a BPO provider with reliable experience in your industry is essential. Ask for a reference and check their client’s track record.
2. Do the Math
Consider how much you will save by outsourcing back-office services compared to internally managing them. Reliable outsourcing providers with plenty of experience can show you the breakdown of costs to ensure you get the best price. You can succeed in your outsourcing initiative by prioritizing both savings and quality.
3. Plan Early
Plan for the growth and expansion of your business. Consider your needs and the type of services you might want to offer as you grow your business. See whether the outsourcing company can keep pace.
Scaling your business requires flexibility and agility. Make sure to look for these two qualities when selecting a vendor to outsource your back-office services to.
Ultimately, your partner needs to understand your goals, efficiently achieve them fully, and continuously review them. You will need to assess whether they are meeting your key performance indicators (KPIs) and project milestones and see whether there are areas that require improvement.
The Bottom Line
The decision to outsource non-core business functions is an essential step to lighten your company’s load and have more time for primary activities. You need not be an expert in outsourcing to know it is a wise business decision. Outsourcing turns your business into a more competitive and growth-driven enterprise.
The functions and processes you choose to outsource will ultimately boil down to your business’s expansion goals, budget, and nature. Asking pertinent questions regarding this is a requisite.
If you need the assistance of experts to ease your transition to an outsourced back office, you can talk to outsourcing specialists at one of the top call center partners in the Philippines, Unity Communications.