The back office of a business represents any administrative or financial services that support a company. For example, retail companies sell goods and services; they do not engage in accounting or administrative tasks for consumers. Back office accounting, therefore, is the financial management of a company that essentially works behind the scenes. The accounting tasks are the same as other companies, normally including accounts payable, accounts receivable, payroll, and inventory management. Companies may be able to outsource back office accounting to a third party in order to focus on their main business goals.
All companies need some form of financial management to support their normal business operations. How they complete the financial management process, however, is often up to owners and managers. Hiring accountants or bookkeepers for basic back office accounting tasks can be costly for a small business. Therefore, owners often complete basic accounting and hire a professional accountant for tax filing. Though this can work well early on in a business, the accounting portion may become too technical for owners to complete in an ongoing manner.
When a small business cannot continue its accounting in house, an option may be to outsource back office accounting practices to a third party. Hiring a local bookkeeping company can fulfill this service. Larger organizations may be able to outsource accounting services to international companies. This is not only inexpensive, but it also removes the need for maintaining offices in its main location. Outsourcing needs to be significantly cheaper than hiring and maintaining accounting staff in the local area.
Like all accounting systems, back office accounting needs to have logical processes in place. This includes a process to capture specific information for financial management, activities in place to record transactions into ledgers, and a manner into which a company puts together financial reports. Integrity, accuracy, and validity are all important attributes of any accounting system, and back office accounting systems are no different. Without these processes in place, a company may wind up not knowing anything meaningful about its financial activities. Monthly reporting is often a goal for all accounting systems in a company.
As the name implies, back office accounting supports the front office of a business. The processes for the former should be driven for the latter. While an owner can make a decision about the accounting process, the change is often made for the purpose of the front office. In short, accounting should be able to provide meaningful data on how to best improve the company’s overall business operations.