Back Office and Front Office Process

Back Office

The back office is the portion of a company made up of administration and support personnel who are not client-facing. Back-office functions include settlements, clearances, record maintenance, regulatory compliance, accounting, and IT services. For example, a financial services firm is segmented into three parts: the front office (e.g., sales, marketing, and customer support), the middle office (risk management), and the back office (administrative and support services).

How the Back Office Works?

The back office can be thought of as the part of a company responsible for providing all business functions related to its operations. Despite their seemingly invisible presence, back-office personnel provide essential functions to the business. The back office is an essential part of any firm and associated job titles are often classified under “Operations.” Their roles enable and equip front-office personnel to perform their client-facing duties. The back office is sometimes used to describe all jobs that do not directly generate revenue.

Example of Back-Office

Today, most back-office positions are located away from the company headquarters. Many are located in cities where commercial leases are inexpensive, labor costs are low, and an adequate labor pool is available.

Alternatively, many companies have chosen to outsource and/or offshore back-office roles to further reduce costs. Technology has afforded many companies the opportunity to allow remote-work arrangements, in which associates work from home. Benefits include rent savings and increased productivity. Additionally, remotely employing back-office staff allows companies to access talent in various areas and attract a diverse pool of applicants.

Some firms offer incentives to employees and applicants who accept remote positions. For example, a financial services firm that requires high-level accounting could offer a $500-per-month housing subsidy to experienced CPAs to work from home. If it costs $1,000 per month to secure office space per individual, a housing subsidy of $500 per month would result in an overall savings of $6,000 per year. The cost savings can be significant when employing many remote professionals.

Though this saves money for the company, the employee may also have to accept a lower salary if they are moving from a Front Office position in a central location to a more remote location or even a work-at-home arrangement.

Front Office

The section of the office which takes on the responsibility of interacting with the clients of the company be it existing or new is known as a Front office. This section also handles the tasks of sales and marketing services along with providing after-sales services. The employees should possess good skills to be a part of this team.

The employees who are working in the front office directly interact and have dealings with the customers of the company. They are ones who have the duty of taking and placing orders on behalf of the customers and ensures that the customers are highly satisfied with the services provided. Since it handles customer satisfaction this section is highly responsible for the growth in revenues of the company.

Differences between Back Office and Front Office

The followings are the key differences:

1. The front office of a company handles direct communication with existing as well as new customers whereas the back office has no interaction with the customers.
2. The front office has sales and marketing departments whereas the back office has the admin department, finance and accounting department, HR department, warehousing, etc.
3. The main responsibility of the front office is to generate revenue and also increase the revenue of the company whereas the others’s duty is reducing the overall costs for the business.
4. The front office helps in developing the strategy to capture new deals whereas the back office helps in ensuring compliance management.
5. The front office tries to generate new deals so that the business increases whereas the back office focuses on the manufacturing of goods and services.
6. An important point of difference arises when salary comes into play. Since the front office employees are the ones who generate the revenue for the organization the salary earned by the front office employees are higher than employees in the back office.
7. Though the front office employees try to think that they are the ones who are doing the most important function, the reality is they are highly dependent on the workings of the other side as they ensure that all the processes are run well, be it admin, HR or IT. Moreover, over the years the roles of some function of the back office have evolved exponentially. For example earlier the role of IT was mostly confined to hardware’s but nowadays in investment banks, the IT team comprises people who develop important technical infrastructure which enables the core operation.

Both play their important roles in order to grow the organization and also make sure all the operations within the organization are running seamlessly. Though traditionally it used to be that the front office employees are the ones who generate revenues and gets paid better, the gap is gradually and surely decreasing in most of the organization with the use of more and more technology over the years.

A lot of functions done by the clients are executed with the help of technology mainly for the whole BFSI sector. This led to the growing prominence of the back-office employees and also enabling them to contribute more in revenue generation part of the business.