Back office is a part of the company that refers to the administration section that supports the front office. It handles functions like settlements, clearances, record maintenance, accounting, IT services, regulatory compliances etc. To gain a competitive advantage, business organizations rely on back office outsourcing because it helps the employees to focus more on value-generating initiatives. In addition, outsourcing also helps reduce operational costs.
Financial fraud is a common issue in many business organizations. Although organizations deploy strong anti-theft systems, dishonest people find ways to steal money. Here are some useful tips businesses can follow to prevent theft in their back office.
- Train your employees: In small business offices, back office functions are often handled by one person and it is the most common place for data fraud. Make sure to rotate all the employees through various processes of back office functions so that no single person is in charge always. This helps the employees to check others’ work for any mistakes or malpractice, and also allows the organization to be transparent.
- Keep a budget: Keeping a budget for any activity in an organization is important. It helps detect fraud and also compare productivity reports with income statements to see how they measure. If your cash inflow does not align with your budget or if the expenses are above the forecast model then it’s time to take notice.
- Understand the effect of timing on your cash flow: Small businesses use the cash basis accounting method instead of accrual method because of its ease and simplicity. In the cash basis accounting system, cash is recorded when money comes into the business and when expenses are paid. This method does not recognize accounts receivable or accounts payable. It is beneficial in terms of tracking how much cash the business has at any given time. Since the transactions are not recorded until the cash is received or spent, the business’s income is not taxed until it is in the bank.
In the accrual system, revenue and expenses are recorded when they are earned, regardless of when the money is actually received or paid. In a cash-basis system, the revenues and expenses become separate or disengaged. When you are following a cash-basis accounting system, what you see in the income statement of the company is that cash that was earned weeks before has been received and recorded. Expenses associated with the revenue-generating activity were paid a long time before. If you are not aware of the “disengaging” or “uncoupling” effect of this accounting method, it is easy for a miscreant to “slip in” some expenses or steal a portion of the revenue.
- Back ground check is important: A thorough background check of your employees is important, especially of those who deal with money. Find out whether your employees have any criminal or financial records. Conduct a thorough research with the help of a third party.
- Review your reports: When you receive and review financial statements, make sure to spend time with your financial manager or accountant who understands all the items in the report. Refer to your old records to see your past reports and compare the numbers.
Similarly, to ensure safety of data, organizations can implement stringent security systems like two factor authentication. In spite of all high alert security systems, we still hear horrifying stories about data theft and fraudulent activities. According to Kyle Marks, CEO of Retire-IT LLC in Columbus, Ohio, employee theft of retired computer equipment is a common occurrence that creates massive liability for a medical practice. These computers may contain sensitive personal data and if these are stolen it could create grave malpractice risk for the medical practice. Data theft and its aftermath can negatively impact the workflow in your organization and it can also damage your firm’s reputation. Create stringent and enforceable policies regulating access to sensitive information, and authorization and authentication of individuals accessing crucial data.
- List all information security risks specific to your organization to know where you might be vulnerable.
- Train your employees to ensure secure information management and destruction
- Make sure to destroy unnecessary data that is no longer needed for business.
- Outsource back office functions to a highly professional provider who ensures total security of data and also provides documentation to certify that the chain of custody has been maintained and work has been completed.
Companies often fail at outsourcing due to poor focus or improper decisions. So, if you are planning to outsource your back office tasks, then the first and foremost thing is to sort out your priorities in logical order and then outsource to a professional vendor. The success of an organization in back office outsourcing depends not only on management skills but also on the practices of the business itself and choosing a reliable vendor is crucial for improving the workflow in an organization.