From data entry to payroll to admin and more, there are likely several tasks that are draining your resources when you could be focusing on core competencies instead. While these types of back office functions are certainly important, spending too much time and money on them isn’t conducive to keeping up in today’s competitive market. 

According to a 2016 ADBI report, common challenges among small and medium-sized enterprises (SMEs) include:

  • Lack of financial knowledge and quality talent
  • Inadequate networks contributing to slow expansion
  • Higher transaction costs than large corporations
  • Insufficient entrepreneurial spirit and resources

How can we overcome these challenges? Back office outsourcing makes a compelling case. Read on to learn more about what it can do for your business. 

What is Back Office Outsourcing?

Like any form of outsourcing, back office outsourcing involves transferring specific functions to a third-party provider. In doing so, you can delegate non-core tasks such as marketing, accounting, human resources and IT to improve efficiency and reduce expenses. This naturally leads to positive growth, as you’ll have more room to leverage your full potential. 

The aforementioned functions are typically handed over to a Business Process Outsourcing (BPO) firm that offers superior access to talented staff and the latest technologies. Making the move can spare you the cost of numerous back office expenses that would otherwise be sucking up your capital. This includes but is not limited to:

  • Office space and utilities
  • Hiring and compensating staff
  • Hardware and software
  • Equipment and maintenance
  • Employee benefits and retention

Your BPO partner can be located anywhere from down the road to another country. Both approaches have their own potential benefits and drawbacks. While generally more expensive, local providers tend to be more reliable and easier to deal with, for example. Offshore outsourcing companies come with some unique challenges. These include:

  • Linguistic and cultural barriers
  • Legal and compliance issues
  • Communication difficulties
  • Security concerns

As for what exactly can be outsourced, your options depend on what your back office currently does. It can be any non-customer-facing function. They’re typically the more process-driven and resource-intensive tasks such as procurement, analytics and data entry. 


In exchange for their services, your outsourcing partner will charge a fee based on their pricing model. Most providers use an hourly rate for FTE or full-time equivalent, which is a unit that indicates the workload of their agents in the context of the tasks being carried out. Others charge per transaction, balanced with KPIs and quality control measures.

There are also ‘co-sourcing’ or ‘staff leasing’ models that charge for each agent. These are most common in functions that require specialist skill sets or in scenarios where businesses want to manage an overseas team directly. In other words, they aren’t leaving the management and control of external staff to the provider but are doing it themselves.

With these kinds of pricing structures, the provider facilitates office space, payroll, processing and IT support for their workers, who report back to the home country of the business. These models are usually more affordable as the outsourcing partner isn’t accountable for KPIs and employee performance. Of course, that’s left up to the business. 

Staff leasing is charged in the form of a monthly service fee with wages and operating expenses passed through at cost or for a small mark-up that gets agreed upon in advance. 

It’s important to take some time to find the right pricing model for your needs. In doing so, you can ensure that your outsourcing budget is used correctly. This is key to be able to reinvest as much of the saved resources as possible into other core, revenue-generating processes that drive your business forward.  

What is Front-Office Outsourcing?

Traditionally, back office outsourcing doesn’t deal with customer-facing functions like market surveys, scheduling and help desk support. These are front office operations that are handled by staff who come into contact with customers or clients, while back office tasks are performed behind the scenes. 

Here’s a brief overview of commonly outsourced front-office functions:


  • Help Desk Support


External teams can efficiently assess problems and provide technical support services. This can improve customer satisfaction and give a better handle on staffing. 


  • Customer Service


With customers being the top priority, being able to offer around-the-clock support is key to staying competitive. Outsourcing has the benefit of gaining access to staff that are not only more available, but also more skilled and competent at providing customer service. 


  • Market Research


This includes compiling, sending and evaluating surveys. Understanding the market and competition is crucial to growing sustainably. Vendors can assist in helping a business make more informed decisions by handling research activities. 


  • Scheduling


Businesses need to have the right amount of trained staff available at all times. Not too many and not too few. Given that it can be a heavy-duty job, especially as a business grows, outsourcing the scheduling function makes sense. There are many providers that are more capable of handling a company’s human resources effectively. 

Now that we have a better idea of what it all involves, let’s head back behind-the-scenes and take a look at how back office outsourcing can benefit your business. 

Benefits of Outsourcing Back Office Processes

Still sceptical? Here are the main advantages of outsourcing your back office needs. 

Lower Costs

The primary reason that most companies outsource is because of how it can improve their bottom line. Developing and maintaining the infrastructure required to run a back office is expensive, not to mention time-consuming. Your provider will be responsible for handling the costs associated with recruiting, training and paying staff. 

This includes compensation, benefits and taxes. The cost of equipment, tools, utilities and office space will also be handed over to your outsourcing partner. Simply shipping off an in-house IT department can save tens of thousands in yearly expenses. This can be true with just your data and network administrators alone, who demand high salaries. 

Of course, this translates to more financial freedom on your side. You’ll have more funds to gain an edge on the competition and offer your products or services at a lower cost. Alternatively, you can reinvest the saved resources into other departments that are more conducive to growth. 

Uninterrupted Service

Hardware and software management has become considerably more challenging with the advancement of technology. The need for innovative solutions is greater than ever. This includes being able to provide a continuous flow of functionality for your internal processes, especially when it comes to the IT department. 

An outsourcing company that specialises in IT will be able to handle these technicalities and allow you to provide 24/7 service. This results in happier customers and more efficient business processes. 

Dampen Anxiety

Both you and your employees will be less anxious when a proper disaster management and recovery system is put into place by the right outsourced service provider. The challenges of a network going down or computer crashing are not only physical, but also worrying for the people who work with the technologies. 

There are concerns about lost productivity, security threats and data loss. These worries will subside when the services are sufficiently protected and maintained. 

Lower Risk

There’s no getting around the fact that every kind of business investment carries a certain degree of risk. An ever-changing barrier of local regulations, competitors, market conditions and technologies ensures this. The external team that you work with will take on much of this risk, allowing them to take it on and avoid it more effectively. 

Disaster Recovery

Let’s say that something does happen. What happens then? Whether it’s a cyber-attack, flood, earthquake or simply human error, management must be able to quickly and correctly address the issue so that it doesn’t result in costly data loss. Let’s not forget about insurance claims, customer relations, structural damage and a myriad of other tasks.

Most companies are ill-equipped to handle these kinds of responsibilities, which can arise at any moment. Having outside help from professionals who are well-versed in disaster recovery and have the backup technology on hand can therefore prove to be extremely valuable. 

Compliance and Security

When it comes to data protection, suffice it to say that you can never be too safe. Take a look at these major data breaches from a few years ago:

  • Over 4.8 million users at V-tech had their data compromised
  • Stolen call logs and recordings resulted in the violation of attorney-client privileges among 70 million inmates
  • Thousands had their personal details compromised after credit card data was stolen from Trump hotels
  • As many as 15 million T-Mobile network subscribers had their information stolen

These make up a fraction of the data breaches that companies have suffered in recent years. To safeguard against them, your business needs to be up to date on the latest security standards. This includes checking if you have a firewall and the right software installed, as well as if all workstations and servers have been audited. 

Of course, these responsibilities all take time, money, effort and expertise to carry out. An outsourced service provider can ensure that you not only stay secure, but also compliant with governed regulations. This can save you from a great deal of trouble further down the road. 

Talent and Technology

Another benefit of back office outsourcing is that you can gain access to trained staff with the necessary expertise required to achieve high results. And instead of having to purchase and maintain new software and hardware, your provider will cover your technological needs. This can be especially valuable when it comes to IT-related functions. 


Perhaps the true value of back office outsourcing lies in helping you reinvest your time and budget into key priorities. Cost savings lay the foundation, while increased freedom to focus on core components further drives growth. Your employees will also be happier and more efficient when doing what they do best as opposed to menial, repetitive tasks.

Drawbacks of Outsourcing Back Office Processes

Valuable as its aforementioned benefits may be, back office outsourcing doesn’t come without a few potential setbacks. Knowing them will help you mitigate any risks before they become a threat. Keep the following points in mind when choosing an outsourcing partner. This will help you avoid providers who put you at risk of facing these drawbacks. 

Data Security

Letting a third party take the reins on your internal functions often requires entrusting them with sensitive information. This is a primary concern among businesses that outsource, as they no longer have the same level of control over their data. Play it safe by checking if the vendor has security certifications such as ISO 27001, HIPAA and PCI DSS. 

You’ll have little to no oversight on how your data is used and stored. That’s why it’s important to assess the provider and ensure that they are using the latest security measures, as well as having the correct data protection and recovery measures in place. A careless partner can result in the costly loss of private information. 

Be sure to also find out about how they dispose of old information. There shouldn’t be any cracks in their wall of defense, even when your sensitive data is no longer in use. Sticking to outsourcing companies with more experience in the industry is a good idea, as this indicates that they likely have enough security measures in place to stay operational.

Quality Control

The lack of control may also extend to quality of output. That’s why you need to work with a partner who’s able to provide regular updates detailing the condition of your outsourced processes. It helps to be clear about your standards and expectations from the get-go. 

The outsourcing provider should have effective policies and measures in place for feedback reporting. No less important is that your company does the same with regular check-ins to ensure that your standards are being followed. 

Hidden Costs

Another thing to request from your provider is a transparent report on where exactly your money is going. Working with a cheaper partner puts you at risk of facing additional charges on top of the specified fee. Investing in a quality service will pay off in the long run. 

Take some time to carefully read the contracts and ensure that you’re aware of all the potential costs and charges that come with your outsourcing partnership. Having a legal team on hand can be helpful here. At the end of the day, no trustworthy vendor will subject your business to any hidden costs, so it really comes down to finding the right partner. 

Communication Barriers

Depending on where your provider is located, you may have to contend with linguistic and cultural differences that can make it challenging to communicate your needs. Aim to outsource either to a local vendor or one with a reputation for having high adaptability and familiarity with different cultures.

Affordable labour isn’t always worth the struggle of not being able to effectively convey what you want and bring up problems when they arise. Choose outsourcing partners that have extensive experience working with global businesses. Some countries that are newer to business process outsourcing, such as the Philippines, are suitable options.

Thanks in part to the influence of Western culture, their way of working is strikingly similar to the US and UK. Aside from the obvious difference in accents, their English is also nearly indistinguishable from native speakers among leading vendors. 

If you can fly abroad and visit them to see their office in action, your chances of partnering up with the right company will be even higher. This will ensure that you avoid most, if not all of the concerns that come with offshore outsourcing. 

Time Zone Differences

Getting work done with an external team, even if they’re just a few hours away, can prove to be problematic. The presence of varying work holidays and major time zone differences will inevitably lead to some frustrating business interruptions if not handled properly. 

The good news is that even offshore providers – at least those that are worth your time – compensate for this by working around the hours of the businesses they provide their services to. Ensure that your partner is flexible and has a history of being able to communicate effectively in the face of time zone challenges. 

The right outsourcing partner has endured the test of time to ensure that their team is available whenever you need them. Get these areas right and you can look forward to a fruitful relationship where the above-listed concerns are a non-issue as you enter your outsourcing partnership. 

Most Outsourced Back Office Functions

Back office outsourcing can incorporate virtually any process that doesn’t involve being in front of a client or customer. This includes accounting, finance, engineering, virtual assistants, software development and more. What constitutes a task worth outsourcing depends on your individual circumstances.

Remember that not everything in your back office can or must be outsourced. Some functions and processes need the special touch that only your internal staff can provide. Others have sensitive information or require certain knowledge that would take too long for an external team to be trained with. 

To get a better idea of what you should choose, consider the following five most outsourced functions. 

  1. Data Entry

Given its monotonous nature, it should come as no surprise that data entry is a popular candidate for back office outsourcing. Granted, it can involve some complicated tasks, such as when information needs to be researched, identified and interpreted. The right provider will have the necessary skills required to ease through these processes. 

  1. Payroll

Another area where a capable outsourcing partner can shine is their ability to reduce the risk of costly payroll calculation errors. You’ll also be able to ensure that staff are paid correctly and on time in addition to shipping off a menial task. 

  1. HR and Administration

Businesses can choose whether to outsource their entire HR department or just specific processes. In doing so, you can improve staff satisfaction and streamline operations by freeing up precious time. Internal admins will have more room to focus on the tasks that require their individual knowledge or ‘special touch.’

  1. IT Support

One of the most important back office functions to consider outsourcing is IT. This is particularly true for post-sales or technical support, which is key to analysing customer interactions to gain valuable insights that drive growth. Your outsourced IT partner will have access to the latest tools and trends, as well as security and recovery systems. 

Some of the specific IT functions that are commonly outsourced include:

  • Help desk operations
  • Desktop support
  • Network management
  • App development
  • Hardware servicing
  • Telecommunications
  1. Marketing and PR

Outsourcing your marketing and public relations needs allows you to strategize and execute across multiple channels while focusing on core competencies. It’s akin to having a great marketing department, but without all the associated costs and responsibilities. 

While these make up the most outsourced back office processes, there are a few more that are regularly outsourced by certain companies. This includes the following functions:

Secretarial Work

If your office is handled only by one person, outsourcing the secretarial function is a good idea. It can save space and significantly reduce your running costs. Your provider can deliver services such as arranging schedules, confirming appointments, answering emails and other duties remotely. 

Typing or Transcription

Converting audio and video files into written format is for many businesses a necessary task. It’s also painstakingly menial. Instead of burdening internal staff with the time-draining task, you can send the material to an online transcriptionist. This can help you avoid having to hire someone just to type the document. 

Customer Support

Not all of your customer support processes are front-office. Several aspects are more related to behind-the-scenes work. This includes analytics. It’s important to regularly assess your interactions with customers to find insights that help you improve your services. However, it requires the kind of expertise that an outsourcing provider readily has available.

Bookkeeping and Taxes

Needless to say that these tasks are crucial and mundane in equal measures. Important as they might be, bookkeeping and taxation are certainly a time-suck. They also require the highest level of accuracy and proficiency to stay clear of costly errors and comply with regulatory standards. 

Managing the function in-house also comes with several expenses, including the cost of software like Quickbooks, Sage, Peachtree and other platforms that only get more expensive as your needs grow larger. Outsourcing companies can provide a range of bookkeeping services, including: 

  • Tax returns
  • Cash flow statements
  • Annual accounts
  • VAT and liability reports
  • Transaction entry
  • Income statements
  • Bank account and card reconciliation
  • Accounts payable reports
  • Ledger maintenance


For businesses that have a fixed or estimated product distribution, the function can be handed over to a carrier. In doing so, you can reduce delivery costs and save a great deal of resources that would otherwise go into setting up a delivery system for your products. The back office distribution control centre is mainly what can be outsourced here. 

Highly Specialised Functions

Finally, there are likely some processes that your business only carries out on a monthly, quarterly or yearly basis. Given their occasional nature, it stands to reason that they’re better off being outsourced as this eliminates the need to hire for and maintain the functions. 

These short-term and temporary tasks can include project management, engineering, construction and contracting. Knowing that you have someone available to take on these processes and carry them out effectively, however seldom, is another way outsourcing can stave off some anxiety and help you focus on core operations. 

Choosing the Right Back Office Outsourcing Partner

Your success with outsourcing back office functions mainly comes down to who you work with. 

Make sure that the vendor aligns with your goals and resonates with your company’s values. Cost savings alone shouldn’t be the deciding factor. Check the provider’s track record and see if they’ve worked with companies in your industry before. You want a partner that’s well-funded to ensure long-term stability. 

Look for a provider with the following qualities:

  • Quality staffing and infrastructure 
  • Reasonable fees
  • Legitimate and extensive work history
  • Financial stability
  • Clear and timely communication

Don’t forget about their location. Other than being free from communication barriers, your partner should also operate in a country with a decent economic climate and low risk of war or other calamities. 

Here’s a closer look at the main steps that you should take when choosing an outsourcing partner:

  1. Define Your Scope of Work

Before you even start looking for a provider, you need to know exactly what you want from them. This can come in the form of a scope of work document. If that proves to be too technical, which is often the case with back office functions, then you can start by answering a few simple questions. For example:

  • What are the exact tasks you want to outsource?
  • What is the best potential solution?
  • What are your quality standards and expectations?
  • How much are you willing to spend?

From here, you can prepare a clear roadmap for outsourcing a particular function. It’s important to note that outsourcing isn’t a plug-and-play process. You can’t expect your partner to have the same level of familiarity with your tasks as you from the get-go, which is also why you need to be clear and comprehensive with your needs. 

  1. Prioritise Expertise

Once your scope of work document is in place, you can start searching for BPO firms that fit the bill. Once you shortlist between three and five vendors, you can evaluate them based on the following factors:

  • Technical competence
  • Talents and skills
  • Access to technology
  • Passion for meeting your needs
  • Experience with complex projects

While often overlooked, technical expertise is imperative for the success of any outsourcing partnership. Avoid partnering with any companies that are only proficient with a few technologies – especially if those technologies are out-of-date. The more software they (truly) know how to use, the better. 

  1. Check Their Market Reputation

The last thing you want is a partner who always misses deadlines, is rude to your staff or perhaps even worse – your customers. That’s why it’s important to check the market reputation of your potential outsourcing partner before signing any contracts. This is easy to do in today’s internet-connected world.

For example, you can use platforms like GoodFirms and Clutch to learn more about the provider and see what previous clients have to say about them. If you still have doubts, you can always get in touch with businesses that the BPO firm has worked with in the past and ask about their experience. 

  1. Know Your Budget

If you expect top-notch services, you need to remember that they cost higher than average. Determine and finalise the details of your outsourcing investment before moving forward. When you’re negotiating with any provider, make sure to clearly communicate your budget and ensure that they are able to offer a pricing model that fits your needs. 

  1. Protect Your Data

In an era where privacy and data security are major concerns for any business, you need to ensure that your outsourcing partner has the right measures in place to keep your sensitive information safe. It’s often recommended that you draw up a nondisclosure agreement that your vendor will sign when the contracts are put on the table. 

Aside from this, your provider should also be conducting frequent security and network audits on their premises. They should have the latest tools and software that will help your data stay free from any leaks or compromises, both of the internal and external kind. 

  1. Find Someone Flexible

Another important factor to remember when outsourcing is flexibility, which goes beyond how you’re charged. The outsourcing company needs to be flexible enough to serve any of your requirements or solve your problems at moment’s notice. This is particularly important when you’re working between different time zones. 

Outsourcing Back Office Operations Effectively

Establishing and maintaining a good relationship with your outsourcing provider is imperative. Aim to be insightful of your needs. Determine whether each function is truly worth outsourcing or whether it’s better off being kept in-house. Some processes may lose their value or uniqueness after being handed over to a third party. 

You should also make sure to define exactly what you want from your partner. There’s no room for compromises here. Similarly, forgoing quality for cost savings is the worst thing you can do. It will only lead to bigger expenses later down the line. Remember that your back office operations are the basis for your front office. 

That said, there are some ways to safely reduce your outsourcing expenses. This includes: 

  • Deciding whether cheaper offshore workers are more sensible than a local labour base that costs less to train
  • Using online conferencing tools to communicate instead of traveling to your partner
  • Choosing a country with a competitive advantage in the particular field you want to outsource
  • Only hiring as many workers as you need 
  • Moving part of your internal team to the outsourcing location
  • Building better relationships and negotiating with your provider

Here are five key steps to outsourcing back office operations effectively:

  1. Know Your Needs

To get the most out of your outsourcing decision, you should know which services you require help with in this department. It will also enable you to save on expenses as much as possible. This way, you won’t have to pay for additional costs when your internal team can manage certain tasks more effectively.

For example, if you require more help with IT than you do with accounting, then prioritising the former will be a more logical decision than spending additional money outsourcing both functions. 

  1. Define Your Requirements

Not all back office operations are equal. They have different requirements when it comes to quality standards and the specific tasks that they encompass. If you want to outsource human resources, for instance, then you may not need to include payroll if you already have software that handles the process affordably and efficiently. 

Similarly, having a third party take care of admin doesn’t always mean that you require assistance with procurement and purchasing. Having a clear idea of your expectations will assist in getting more accurate quotes and finding a service that best suits your needs. Don’t forget to have documentation that defines your expectations when it comes to quality. 

  1. Avoid Cost-Cutting

As you are probably aware, reducing expenses should never be the sole reason for your outsourcing move. Forgoing quality for the sake of affordability is no way forward. Taking the opposite approach will ensure that you’re able to run operations smoothly and ultimately receive the output that customers expect from your business. 

With fewer errors, quicker turnaround times and an overall more professional execution of your outsourced functions, you’ll see a clear difference in the final service that reaches your buyers. In addition, it will have a better effect on the satisfaction of your internal staff, especially when the outsourced functions pertain to HR and payroll. 

That said, ensuring quality doesn’t have to mean paying unnecessarily high prices for your core processes. It’s mostly a matter of performing due diligence when choosing a partner, which the information listed above can help you with. 

  1. Understand Legal Requirements

A common concern when outsourcing is determining whether the vendor is complying with any necessary laws and regulations. This can be particularly challenging when your partner is located in another country where the rules are different. That’s why it’s a good idea to be fully aware of all your legal requirements when making the move. 

Local laws pertaining to minimum wage policies, tax statuses and data protection guidelines should be on the list. Remember that they don’t necessarily account for who is doing the work. Your own business is ultimately responsible for how processes are handled. 

  1. Know How Costs are Calculated

There are a number of factors that influence what an outsourcing company will charge for their services. This includes the following key elements:

  • Reputation
  • Scope and speed of services
  • Experience and skill level
  • Portfolio and work history
  • Ease of working together

Needless to say, all of these factors are important for a successful partnership. Keep them in mind when determining whether a certain vendor is worth the price, or whether it’s necessary to move up a level.  

Key Considerations before Outsourcing Back Office Operations

Let’s end off with some things to be aware of moving forward. 

You’ll need to discuss your outsourcing plans with internal staff. Get everyone involved and encourage them to share their thoughts so that you can gather insights. Don’t forget to look at the long term and do some analysis on how your outsourcing move will affect you in the future. It’s always better to mitigate the risk and start small. 

Creating a transition plan will also help. It should include your specific needs, areas for improvement and potential concerns. In fact, you should have a detailed overview of all of the commercial, legal and financial risks that may come into play. Dealing with a single company will further reduce your risk. 

As you move into the relationship, remember to keep your communication lines open and regularly monitor the performance of your partner. We can detail these key points over a three-stage process, namely planning, execution and supervision. Here’s what you need to know: 

  1. Planning

Getting to this stage can be easier said than done. There’s a lot to consider, especially if it’s your first time outsourcing. Remember that a successful partnership requires collaboration from everyone – including your internal team. Getting staff to share their opinions on the move will help you gather valuable insights for a more informed decision. 

You should also explain why you believe that your company needs to take this step in the first place. This will help everyone understand the reason behind your move. This is where it helps to consider the long-term outcome of your outsourcing choice. Knowing how it will affect your business in later months and years is important.

Explore your options carefully and try to start small. This will minimise your risk and help you become more familiar with how the outsourcing process works and what it involves. 

  1. Execution

This is where you begin handing over your first back office function to a BPO firm. As mentioned above, you should take some time to employ a two-way transition plan. Discuss your specific needs with your partner and keep their own objectives in mind. They also have to benefit from the relationship if it is to be worthwhile for them. 

From here, you can develop an effective governance and management process. This will ensure that your standards and procedures are carried out by the book. It will also guarantee that none of the work you’re entrusting will be compromised. On that note, you should determine a plan to counterattack any potential risks if they come to light. 

Whenever possible, the best approach is to deal with a single provider as opposed to numerous vendors at once. The better they are at doing what they do, the more trust you can put into them and the more easily you’ll be able to oversee their performance. This also contributes to less admin work. 

  1. Supervision

Back office outsourcing is a constant effort. A successful transition doesn’t mean the end of your contribution. To make your move work, you need to treat it as an ongoing relationship and not a way to hand off the responsibilities that come with the outsourced task. 

For this reason, you should make sure to keep your communication lines open and maintain a constant feedback loop between both parties. Maintaining a positive and productive relationship will inspire your partner to provide better service. Analysing their performance and identifying room for improvement has the same effect. 

Look out for any issues and be sure to bring them up with your vendor as soon as you’ve identified a suitable solution. Understand how you can contribute to their own growth at the same time. After all, your outsourcing partner is also a business that needs to thrive and stay ahead of the competition in a fast-growing industry. 


Back office outsourcing is more than just an effective cost-cutting tool. Give your first outsourced function some thorough consideration before putting things into motion.