- Posted on February 04, 2020
- Financial Terms
- By Glory
What is Back Office in Finance?
Traditionally, a company is made up of two portions, the front desk, and the back office. However, a financial firm has another portion referred to as the middle office. The front desk does not mean that people who work in this sector sits at the front section of the office while those at the back office sits at the back section.
The back office simply refers to workers in a company whose task does not involve direct dealing with the clients or customers. The front-desk workers are the ones who often handle business with clients and customers. Though back-office workers are not involved in generating income directly for the company, they are very crucial to the company's growth and development. Example of the back-office department includes the human resource and administrative department, the IT department, regulatory compliance, record maintenance, clearance, and settlement.
The back office applies to the portion of the company that does not deal with clients directly but handles administrative and support issues.
The function of the back office department includes clearance, settlement, record maintenance, accounting, regulatory compliance, and IT service.
The term back office originated in the early day when companies and business organizations were first introduced. During this period, companies were designed in such a way that workers at the front are the ones who engage in direct interaction with the clients. They attend to the clients' needs and handle business arrangements with clients or customers. However, those at the back portion only handle issues that do not involve directly interacting with clients or customers.
The Function Of The Back Office
The back office handles all the other aspects of a business that are related to business operations and supports.
Though they might seem invisible, they are crucial to the development and growth of the business. Their jobs help to ensure the flow of the jobs of the front desk workers.
Examples Of Back Office
In the business world today, the back office is usually separated from the headquarters. This is why most back offices are located in places where the cost of labor is relatively low, commercial leases are inexpensive, and there is an adequate labor pool.
Many companies, however, outsource the back-office role in order to reduce costs. Added to this, the growth in technology made it easy for companies to operate remote back-office workers. Employing a back-office worker to work from home helps the company to save more money. For instance, a financial institution might offer an incentive to CPA applicants or employees who would work from home with a paycheck of $500 per month. If the cost of securing an office for such an employee is $1000per month. By working from home, the company would save $6000 in one year.
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