Putting in place the back office processes

Graham Richardson's picture

One of the key aspects of any business is its back office function and processes. This is where the recording of all financial activities of the business takes place, including, the invoicing of sales, the collection of debts and the payment of all costs incurred in running your business.

The back office functionality and processes required will depend on the nature of the business, the intricacies of the service or product, the complexity of the supply chain and the delivery mechanism of the good or service being delivered to the end customer.

With businesses that I have worked with in the past, back office functionality has ranged from that of very simple in nature to those of a more intricate nature with up to 400 individual controls being operated. From past experience the best and most effective processes that I have seen have been simple to operate, routine in nature, well documented and efficient. Controls should be cost effective and should not unnecessarily slow down the activity of the business and the speed at which it operates.

How do you go about putting these in place? Understanding the business and what it is looking to achieve is a good starting point – this will give you a good feel for how, what and when. There are a number of fundamental controls that need to be in place for any business, which include, but are not limited to, the invoicing process, the control over the funds of the business, the ability and value to which staff are able to commit the business to a third party and how the company settles these liabilities on an ongoing basis. Consideration should be given to the nature of the product or service and the business cycle that is being dealt with. A business may be highly profitable, however if the cash flow is not managed correctly then this will have a detrimental effect on the expansion of the business and possibly its own existence in the longer term.

Important areas to consider when setting up any back office function are the banking institution(s) that should be used, the finance and i.t. systems to be implemented, segregation of duties to be imposed, the authority levels required and the decision making criteria to be followed, along with where the back office function should be situated and the cost of running this function.

There are a number of detailed tasks that need to be followed to ensure that the setting up of the back office function is robust and scalable for the growth of the business that is projected. Consideration should therefore be given to the timeline involved, the magnitude of growth projected, the systems to be implemented, constraints that business faces and the industry that the business operates in.

Each set-up that I have been involved in has shown a number of similarities, however there have also been vast differences, which have arisen as a result of the country of operation, the industry or sector and whether the concern is of a commercial or public sector nature.