Back office functions are, in many ways the powerhouse of a business’s viability. Ask any of our portfolio Finance Directors (FDs) and other Finance professionals - they’ll tell you that the settlements, clearances, record maintenance, regulatory compliance, and accounting they manage in the back office are an indispensable counterpart to customer-facing activity, not least because they help ensure the business gets paid on time. 

But interestingly, despite the importance of the back office team in disciplines like Finance (as well as HR, IT, and others), relying completely on a full-time, in-house back office team can actually prove counter-productive. 

How so? And what should you do to resolve it? 

In-house versus “insourcing”: what’s the difference? 

First off, let’s clarify terms. “In-house” is straightforward enough: salaried employees with additional pension, benefits, and National Insurance costs.  

But whether they’re there full-time or part-time, they’re only actually productive, on average, for a little under 3 hours a day, according to recent research. 

The alternative – obtaining back office support from an external provider and paying for time used – is often called outsourcing, but the term doesn’t really do it justice. Because done properly, this kind of service is actually more like “insourcing” – that is, becoming an integral part of an existing Finance team, on site if needed, and responding as rapidly as an in-house position would.  

Also, in this scenario, the outsourced teams consist entirely of experienced operators, rather than trainees, with a broad skill set to satisfy client needs and guarantee adequate cover and back-up. 

Whatever you call it, it’s a world away from adding a full-time FD’s wage bill (c. £150,000 per annum) to your cost base, and, as we mention above, it delivers greater productivity, value, and return on investment. 

Here are just a few examples of how it does that. 

Reduced operating costs 

First and foremost, it’s about hard cash. Outsourced back office functions like Finance can result in savings of up to 40% versus hiring additional staff, when wage bills, benefits, holidays, recruiter fees, and other employment costs are taken into account.  

But you’re also quids-in on the productivity front, an experienced outsourcer will come up to speed much more quickly than a total newbie.  

Increased productivity, better core focus 

Outsourcing back office functions can also take the strain off existing employees, reduce their workload, and enable them to perform better by focusing on the demands of their core tasks. 

This is a huge issue at the moment, particularly in the compliance arena, where an increasing number of HMRC initiatives, updates to employment legislation, and other critical changes can get overlooked by busy staff being pulled in too many directions at once. ? 

Far better to outsource it, as this enables formal service level agreements (SLAs) to be put in place that will focus attention very closely on keeping the business compliant. 

Pay for what you use, but use whatever you need 

Outsourced back office support offers the convenience and cost-effectiveness of a fixed price for a fixed number of hours per week or month – so tick that box. 

But the model tends also to be highly flexible about extending the number of hours as and when you need them, or indeed combining them with a greed additional project work, and, if needed, bringing additional experts on board. 

In practice, many businesses turn to an outsourced professional to help with one specific task or process, but then find that same pro can also add significant additional value elsewhere in the team or organisation - often by sharing insights and guidance to make improvements above and beyond the original remit – and again, without a full-time salary bill in sight.  

It’s an approach that’s both flexible and scalable. 

High-calibre specialists you can’t afford to be without 

Outsourced back office support is often delivered by seasoned experts with many years’ experience behind them and significant specialisms under their belt, acquired in successful previous corporate careers.  

For this reason, they inevitably deliver benefit over and above what a less experienced or less specialised full-time employee could – and in many businesses, it has to be said that there are numerous Finance roles that typically aren’t afforded the expertise they require.  

An excellent example of this is credit control. It’s absolutely critical to accelerating cash collection and reducing bad debt exposure. Yet most SMEs don’t have an internal credit control specialist and rely on people who may tend not to assert themselves, for fear of upsetting customers, and cannot give the role focus or priority. 

It’s a missed opportunity, because in reality a credit controller can very quickly pay for themselves - and the role may often only need a few hours’ work per week or month. It’s a small price to pay, particularly in a market like today’s, to make sure your business gets paid first, before your customers’ other creditors. 

(At the same time, though, do watch out for the fit between the worker and the role – an FD, for example, not matter how expert they are, shouldn’t be paid that kind of money for doing bookkeeping.) 

Breadth of knowledge 

Finally, one of outsourcing’s key differentiators is that the specialists it provides don’t work for one client only – they tend to work for several, often of different sizes and across a range of sectors.  

This enables them to bring a wealth of situational knowledge to every role and apply broad learnings that drive better decisions and outcomes. 

Finance - the standout outsourced back office function

It’s also important to remember that whilst many back office functions can be done more cost-effectively using outsourced expertise, outsourced Finance is in a league of its own. 

This is because expert Finance leadership and management can not only save costs and increase productivity, but can also identify strategic opportunities to maximise revenues, and put in place initiatives, systems, processes, and tools to support those goals.  

For more information on how EFM can help you with expert, cost-effective support in your Finance back office, get in touch today.