As every recruitment agency owner knows, being your own boss comes with many positives, but also plenty of negatives. Most of those negatives revolve around administration, and the countless processes and systems that you need to put in place to keep your business running smoothly. These processes are commonly referred to as the ‘back office’ – stuff your clients don't necessarily have visibility of but is nevertheless essential to your operational success.
If you plan to have a team pull together different tools and carry out the different back office processes, then remember to check that any software you go for will integrate and that you have the time and manpower needed to manage them.
In this blog we discuss back-office outsourcing options, what to consider when assessing your back office and give you an quick overview of pros & cons.
Back office outsourcing involves contracting external experts to handle your company’s administrative, financial, and operational tasks, allowing your team to concentrate on core business activities like recruitment and client relations. Back office functions typically include tasks such as payroll processing, invoicing, compliance management, and general administrative duties. These are essential for keeping your agency running smoothly but let’s face it, they can be seriously time-consuming and complex to manage internally.
One of the most important aspects of back office management is administering and tracking your finance deal from your finance partner. This involves monitoring credit lines, ensuring timely payments, and staying within financial limits. Outsourcing these functions to professionals who specialise in finance management for the recruitment industry ensures that your financial operations are handled with precision and care, reducing the risk of errors and helping maintain strong cash flow.
Outsourcing your back office functions offers several significant benefits. First and foremost, it can lead to cost savings. Hiring and training in-house staff with the expertise to manage these tasks can be expensive, especially for smaller agencies. By outsourcing, you can access these specialist services without the overhead costs associated with full-time employees.
Efficiency is another key advantage. External providers often use the latest technology and processes to handle tasks quickly and accurately, improving the speed and quality of your back office operations. This allows your team to focus on what they do best: finding and placing top talent.
Lastly, outsourcing can enhance the speed of your operations. With a dedicated team handling your back office tasks, processes are streamlined, reducing delays and ensuring everything runs smoothly.
If you’re an ambitious recruitment agency with growth on your mind, then staying on top of your admin tasks like a pro will be one of the keys to your future success. There are also many choices to be made when it comes to how you will manage each individual back office function.
Another important consideration is how you are going to deal with the implementation and ongoing management of all these different systems. Do you have the resources to do so? Or should you be outsourcing all these functions to a trusted partner?
One increasingly popular option is to call on the services of a specialist all-in-one solution provider, who can help keep things simple by offering the complete package in one place. Such solutions cover everything from payroll to invoicing, compliance to cash flow. They also remove the need to source and land a finance deal.
Alternatively, there is the option to manage the back office in-house, with or without calling on external support to outsource certain tasks, such as payroll. In this instance, an agency will typically pull together a range of different tools and resources. Checking that these tools will actually integrate and share information is of the utmost importance. For example:
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In-house management You may choose to manage all your back office functions in-house, implementing and integrating different software packages and employing finance, compliance and admin specialists as needed. |
Part outsourced You may opt to outsource some of your back office functions, seeking external support services to cover your core requirements while still managing some of the back-office processes internally. |
Fully outsourced You may prefer to fully outsource your back office and get a solution that takes all the administrative stress away from you by providing all the finance, software, support team and reporting in one go. |
Whatever set up you favour for your recruitment agency’s infrastructure, it’s not a decision to be taken lightly. The importance of establishing a strong back office function, with robust systems and processes capable of scaling up and evolving with the changing needs of your business, can’t be underestimated.
Remember, you are effectively laying the foundations of your business for the long term. Which is great, as it will leave you to focus on what you do best – growing the business – safe in the knowledge your operations are in great shape.
It’s therefore essential to make an informed decision. That means crunching the numbers until you have an accurate picture of what the cost of your back office really is, comparing like for like and understanding what the implications of each potential setup structure may be.
While on paper this may sound like a simple enough exercise, many elements need to be taken into account (including some things that are often overlooked). The good news is your time and efforts will be well spent. Once you’re armed with the facts, you’ll be in a far stronger position to make the right choice for your specific needs and future plans.
As a starting point, we’ve taken a closer look at some of the different factors you’ll need to consider when assessing the true cost of your recruitment agency’s back office. From manpower to administration, compliance to technology, here are some pointers to help make sure your decision adds up.
When considering whether to outsource your back office functions, it's essential to weigh several key factors to determine if it's the right move for your recruitment agency.
Managing your back office in-house can be incredibly time-consuming. Financial administration tasks, such as payroll, invoicing, and compliance, can quickly eat up valuable hours, especially when you have multiple systems and suppliers to manage. Outsourcing these functions can free up significant time, allowing you to focus on core business activities like recruitment and client relationship management.
Employing an in-house team for back office functions means being responsible for full salaries, pensions, benefits, and associated expenses such as equipment and travel. The cost of having employees is often underestimated because it also includes the time and cost it takes to advertise and recruit as well as paying for temporary cover, where needed, for holidays and sick leave.
Additionally, onboarding and training new employees require time and resources, further stretching your capacity. When you outsource, you're not just hiring individuals; you're gaining access to entire teams of experts. These teams bring specialised knowledge and experience, and you can tap into top experts whenever needed without the ongoing overhead costs of full-time employees.
If you outsource standalone components of your back office functions, then you also need to consider the cost of managing multiple software platforms which can add up quickly. Each subscription represents an ongoing expense, and as your agency grows, these costs may increase with extra licenses for example.
Moreover, handling tech-related issues, updates, and maintenance can be a drain on resources. Outsourcing often includes access to the latest technology as part of the service, helping you avoid these incremental costs and headaches.
When choosing recruitment back office software, it’s important to select a solution that will always help you leverage the technology to its fullest potential. Ideally, your software should be cloud-based, ensuring you’re always using the most up-to-date version without needing to pay for future upgrades and easy to integrate with other core systems like CRMs and Accounting software.
One of the benefits of outsourcing is having experts that can operate on your behalf as an extension of your team. In this scenario, make sure to choose suppliers with excellent customer service, those that can uphold your service levels and protect your brand reputation. The best providers are responsive, have low staff turnover, and actively listen to feedback, making your life easier and allowing your agency to run smoothly.
When searching for a supplier, you can ask key questions to check on customer service ethics, including what their average response time is, how their technology supports compliance and how adaptable they can be for specific requirements.
Consider your appetite for risk versus reward. Yes, while banks may offer cheaper financing options, they often come with numerous restrictions and little to no tech support.
If you opt to secure finance from your bank, or another lender, it’s important not to just think about the headline cost. There are likely to be set up costs, minimum fees and of course the interest to cover, along with associated penalties - you will need to reach a minimum turnover level or face extra penalties. They will often impose restrictions with concentration levels too – having just one client, for example, may be a problem.
It’s common that lending institutions don’t provide any financial administration software or business support. In contrast, outsourcing to a finance partner can give you more financial flexibility with less risk, meaning you'll have all the tech and support your agency needs to grow.
In-house |
Pros |
Complete control: you have full oversight and control over all back office processes, allowing you to customise and adapt operations to your agency's specific needs. Direct access: immediate access to data and staff, enabling quick decision-making and adjustments without relying on third parties. |
| Cons |
High costs: maintaining an in-house team and sourcing your own software requires significant investment in salaries, benefits, training, and managing lots of different standalone technology suppliers. Resource intensive: managing back office tasks internally can be time-consuming, taking focus away from core business activities like recruitment and client relations. Limited expertise: in-house teams may lack specialised knowledge or experience compared to external providers who focus solely on back office functions. |
Part-outsourced |
Pros |
Cost savings: outsourcing specific functions can reduce costs while still allowing you to manage critical tasks internally. Flexibility: you retain control over certain processes while outsourcing others, allowing for a balanced approach that fits your needs. |
| Cons |
Integration challenges: combining in-house and outsourced systems can lead to data integrity issues and communication gaps if not managed properly. Complex management: coordinating between in-house staff and external providers with different service level agreements can create additional layers of management and potential inefficiencies. Partial loss of control: while you maintain control over some areas, you may have less over outsourced functions, potentially leading to misalignment in the way things are done. |
Fully outsourced(single system) |
Pros |
Streamlined operations: a single provider handles all back office tasks on a single system, simplifying processes and reducing the burden on your internal team. Expertise and compliance: with a back office solution, you have access to experts with specialist knowledge, and you can be confident that you are complying with industry regulations. Advanced technology: outsourced providers often use the latest technology and systems, offering automated processes and AI-driven tools without the need for in-house management. Cost efficiency: bundling all back office functions with one provider can be more cost-effective than maintaining multiple in-house systems and teams. |
| Cons |
Relinquishing control: outsourcing everything means handing over direct control over your back office operations, which may be difficult at first. Potential for misalignment: if the provider’s approach doesn’t fully align with your agency’s goals or standards, it can lead to inconsistencies in service quality and client satisfaction, making it essential to choose a provider with excellent customer service standards and flexibility. |
Finally, consider the perception of your company. The value of the experience you provide (i.e. what it’s like to work with you), whether as a customer or contractor, should never be underestimated. How you choose to run your back office and daily operations will heavily impact the experience people have. Every aspect of how you do business can influence reputation, retention, and business growth. The quality of your services needs to be consistent across all levels and functions. Having the right technology in place, the right expertise supporting your service delivery and the flexibility to adapt are all key elements in maintaining this value.
For anyone reviewing their current back office functions, there is a lot to consider if you’re to understand what the true cost implications may be. Our top tip is to consider the total cost including the cost of you and your team’s time spent on back office functions, and to think about how that time might make you more money were you to have it back thanks to outsourcing. That way you’ll ensure you have an accurate picture and can make an informed decision.
Last updated: September 2024