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Why a Poorly Run Back Office Will Hurt Your Bottom Line

Imagine you’re looking for a new home, and after a long search you find what appears to be the perfect one...


Timing of payroll enrollment

It looks beautiful, is set on the perfect lot, and is just the right size and design. Then you hire an expert to take a closer look. The inspector finds that almost every system is flawed – the foundation is cracked, the electrical and plumbing systems are in need of extensive repairs, and the roof and drainage systems have failed to protect the structure, so there is significant water damage. Once you’ve learned what’s behind the beautiful exterior, what on the surface had looked like a dream home now promises to be a nightmare. Will you buy it? Probably not.


Sadly, that scenario also describes many businesses. Behind the attractive office space and great service or product, there may be issues with back office operations that aren’t immediately apparent. But, those issues will inevitably hurt a business and possibly even lead to failure.


Running a business takes significant time and effort. No business owner intends to neglect any aspect of their company, but the back office often gets less attention than it requires. After all, such areas as accounting, compliance, policies and procedures, and employee management don’t demand attention and often come a distant second to the rush of customer-facing operations. As a result, they fall into the “someday” pile and, as we know, “someday” rarely comes.


The mistake many business owners make in considering their back office is to see it as separate from the revenue-generating portion of their company. Nothing could be further from the truth. In fact, strong financial management that gives an accurate picture of the company’s fiscal health is a must for detailed business planning and determining the right growth strategy. It can spell the difference between making decisions that will hurt your bottom line from those that will help grow it.


In the absence of careful planning and execution of consistent procedures and best practices in running a business, you’re left with what can be haphazard and uneven processes. When business is good and ample revenue is flowing in, the hidden costs of a poorly-run back end may not be immediately apparent. But many businesses discover their structural vulnerabilities too late once their business is put under any external stress such as declining revenue or a tighter regulatory environment. In short, they aren’t able to recover in time and fail for lack of sufficient controls and organization of those critical processes.


And finally, while often overlooked as a factor, your back office operations directly support your valuation. Improved operations will not only add to your efficiency and value over time, they are what potential investors will consider when assessing the viability and growth potential of your company. And while you may not be courting investors, taking the perspective of one will help you better identify your back office gaps.


So, what can you do right now to put your company’s back office on the right track? Don’t let more time slip away. Consider working with an expert partner who can help you reach that next level. Talk to us. We’ve worked with hundreds of businesses to identify and address their business operation needs.


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