You’re a business owner and there are only so many hours in your day. Growing your business is essential but you’re not sure how when you’re in charge of the back office work, too. Simply ignoring the business administration work is not advisable — it will likely come back to haunt you.
The terms “back office” and “business administration” mean different things to different people. For a bit of background, we’re talking about the tasks involving corporate housekeeping, contracts administration, compliance and risk management, HR and employee benefits administration, records management, bookkeeping, and payroll, just to name a few.
Some would say that bookkeeping, payroll and other HR-related functions fall within the back office, while corporate housekeeping, contracts administration and records management, for example, are business administration tasks. The term used to describe these tasks isn’t important. What’s important is that business owners understand that these functions are at the heart of their business and are indispensable. The issues and skills required to perform these tasks have a natural amount of overlap. So commonly, we tend to group them together when talking and thinking about them. And sometimes we refer to the group as the “modern back office,” or just the “back office” for short.
In the decades we’ve been working with business owners, not many mention enjoying back office or business administration work. They’d rather be cultivating new strategic partnerships, bringing in customers, or dreaming up new products and services.
They are often frustrated that running their business gets in the way of doing business. Maybe this sounds familiar.
But even those business owners who don’t mind managing this work or actually doing it themselves have the same challenge if they’re also the rainmakers. How can they find enough time in their already-too-short day to fit everything in? It’s virtually impossible to do it all – and do it all well – even if you like what you’re doing and are good at it.
The bottom line is that business growth, your financial well-being, and your sanity don’t have to suffer because of the back office.
The Modern Back Office: You Can’t Live With It and You Can’t Live Without It
We shouldn’t minimize the importance of back office and business administration tasks. These functional areas of a business aren’t revenue-generating or customer-facing (hence the term “back office”). But they shouldn’t be downplayed as they are critical to the survival of a business. These functions make up the cornerstone – or foundation – of every business.
If these areas aren’t properly structured and continuously looked after, a business may eventually crumble.
The back office is like the main ingredient in your favorite recipe. Without it, the dish just won’t taste right. It’s the anchor that holds the ship in place, the hub of the wheel, the backbone of the body, etc. We could go on but the point is: a business can’t survive without a properly-structured, efficiently-operating back office.
A poorly-operated or non-existent modern back office creates inefficiency, issues that are expensive to fix, legal consequences, or in the worst case, failure of the business entirely.
Size Isn’t All That Matters
For many small and medium-sized businesses, efficiency and success in the modern back office is difficult to achieve. There may be a complete lack of interest in the tasks that need to be performed. Not to mention, these less desirable tasks are easy to ignore or wish away. Maybe there are budget constraints on hiring a skilled employee to do the work in-house. This could cause the business owner to spend many hours learning how to do work they presumably don’t even like. Or maybe the business owner doesn’t even realize what needs to be done in the back office. A small business owner who is knowledgeable and skilled in these matters may have the different challenge of overcoming the “no one else can do it like I can” mentality.
Larger businesses may not face exactly the same challenges, but that doesn’t mean they’re free from back office struggles. One option is hiring a Chief Administrative Officer to ensure completion of back office and business administration tasks. The CAO may actually do the work, he/she may hire other employees, or outsource the tasks altogether adding even more overhead costs.
Not every organization’s approach to the modern back office is the same, and it shouldn’t be.
Size may be a factor but there’s also a strategic element to defining the approach, which is driven in part by the philosophies of the business owners and other business leaders. While customizing the modern back office approach based on the organization’s size and strategic plan is important, the wheel doesn’t need to be reinvented, particularly when it comes to standard processes and procedures that are at the heart of just about every efficiently-run business.
When done correctly, the modern back office keeps a business intact, allows a business to grow, helps identify and mitigate risks, drives efficient and effective operations, and ultimately reduces costs – all of which increase profit.
Outsourcing: A Cost-Benefit Analysis
A business owner who needs to offload back office duties may be more comfortable outsourcing before onboarding a new employee. It’s a way of dipping a toe in the water before jumping in. There are any number of articles on outsourcing, specifically on the question of whether outsourcing is right for your business.
Personal productivity impacts the productivity of a business. The more productive people are in a business, the more productive the business is. And greater productivity in the business usually means an improved financial bottom line.
So ask yourself this: What is the most financially-productive way to spend time focusing on your business?
An in-depth discussion on whether outsourcing is the best strategy for your business is beyond the scope of this article. If you’re considering it, stay tuned for the second part of this post for a few things to think about.