What Is Back Office?

The back office is the portion of a company made up of administration and support pꦅersonnel 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 often segmented into three parts: the 澳洲幸运5官方开奖结果体彩网:front office (e.g., sales, marketing, and customer support), the 澳洲幸运5官方开奖结果体彩网: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 busineꩵss. 

The back office is a foundational part of any firm, and associated job titles are often classified under "Operations." Their roles enable and equip front-office personnel to perform their 澳洲幸运5官方开奖结果体彩网:client-facing duties. The back office sometimes describes all jobs that don'✅🐻t directly generate revenue.

Effectively, the back office finalizes the transactions conducted by the front office. This includes confirming transactions and settlement instructions with the counterparty's back office. The back office is also responsible for trade clearances, record maintenance, accounting, and IT services.

Example of Back Office

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

Alternatively, many companies have chosen to 澳洲幸运5官方开奖结果体彩网:outsource and/or offshore back-office roles to reduce costs. Technology has afforded many companies the opportunity to allow remote work arrangemenꦿts, in which associates work from home. Benefits of those models 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 companies 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 🦄澳洲幸运5官方开奖结果体彩网:certified public accountants (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 whe🧸n 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 re🌟mote location or even a work-at-home arrangement.

Back-Office Interaction with Front Office

Although back-office staff members don't interact with customers, they tend to actively interact with front-office staff.

For example, a manufacturing equipment salesperson may enlist the help of back-office staff to provide accurate information on inventory and pricing structures. 澳洲幸运5官方开奖结果体彩网:Real estate marketing professionals frequen🍰tly interact with sales agents to create attractive and relevant marketing materials. IT professionals regularly work together with all divisions of the company to ensure that systems function properly.

Many business school students from so-called non-target colleges and universities may see back-office work as a way to gain experience within a firm and potentially network up into a front-office role. (Target schools send significant numbers of 🐼their students into investment ban𒈔king each year and have extensive alumni networks in the industry.)

The Bottom Line

In finance, the back office plays a crucial role in supporting the front office (entities such as sales staff or a trading desk) by processing trades made by bank customers or for the banks' own proprietary trading operations. Some of the back office functions are confirming trades and settlement instructions, clearances, record maintenance, regulatory compliance, accounting, and IT services.

Front office activities couldn't be processed without the back office, and the back office wouldn't exist were it not for the front office's sales and trading activities, making teamwork essential. While frequently unseen, the back office performs critical duties stemming from front-desk activities. However, back-office operations are a cost center, leading many financial firms to relocate their back-office or operations teams to less-expensive locations like Florida or North Carolina, rather than where the head office may be located, for example, New York or Chicago.