What Is a Middle Office?

What is a Middle Office?

The middle office is a term that is applied to business functions that focus on monitoring and providing information about the outcome of efforts conducted by the front office. The data that is received and structured by the middle office is then passed on to the back office, which in turn completes the transactions necessary to keep the business active. Often, this section of the business is part of the operations division of the firm, and focuses its attention on such important tasks as quality control, risk management, and loss prevention.

In many situations, the middle office functions as a support mechanism for the front office. One example of this type of relationship can be seen in the sales efforts of the business. As the sales force wins customers for the business, the middle office handles the tasks necessary to handle the fulfillment process, allowing the customer to receive the goods or services ordered. In the event that the office, as part of the operations area of the business, is unable to deliver on the promises made by the front office, the customer is usually lost. For this reason, close communication between those who sell the products and those who engage in product delivery is extremely important.

While the concept of a middle office can apply to any type of business, the term is routinely used in businesses that focus on providing financial services. Here, this section of the company operation often focuses on managing the flow of transactions within the company, as well as maintaining detailed and accurate records regarding those transactions. This makes it easier to maintain an accurate accounting of the profit flows of the business, and plays a major role in the settlement of accounts.

The middle office often has the responsibility of providing the back office with the data necessary to complete the transaction process with the customer. Once a customer order has been successfully prepared, the data is transmitted to theback office, where delivery can be scheduled and the invoicing process can take place. Without the middle office to supply essential details, the back office would be unable to manage these functions, and the company would never generate cash flow.

In just about any type of business, the middle office functions as the perfect link from the open market functions of the company, and the successful completion of the interaction with the customer. By helping to manage the flow of information, managing the use of resources in the preparation of the product delivery, and passing on essential data for the completion of transactions, the middle office provides the framework that provides the company with an efficient and logical operating structure. When some factor inhibits the ability of the office to manage these important functions, every other area of the business finds it much harder to efficiently operate.

What is a Back Office?

The back office is a collective term that refers to the portion of a business operation which is focused on handling the tasks necessary to keep a company functioning. This designation comes about from the tradition of housing these functions in the rear of a business facility, away from the general public. An arrangement of this type was once very common with all types of businesses, and still holds true for the layout of many different types of business operations such as retail stores and other sites where customers are likely to visit the facilities.

The traditional arrangement for a place of business called for three distinct areas in the general operations architecture. First, the front office provided an area where customers could interact with sales staff and others. The middle office was often the site of clerical and administrative functions, as well as the area where company officers have office space. A back office housed functions that help to keep the other two sections in perfect working order, making it essentially the heart of the business process.

Today, a back office is likely to include space for the performance of three key departments in the overall company structure. The accounting department is part of this group, and is responsible for accurately recording the financial transactions that take place as the ongoing operation of the business. Among the many functions handled by this department, personnel working in this area will handle such issues as making sure payrolls are prepared in a timely fashion, payments to vendors are made on a regular basis, and that payments received from customers are accurately posted to each customer’s account.

The human resources department of the company is also part of the back office structure. This area is responsible for working with managers to secure employees for open positions, develop and oversee the relationship between the company and each employee, create hiring, disciplinary, and termination procedures, and intervene when there is an issue between any two employees of the business. The efforts of the human resources department have a direct impact on both the middle and front office, and the personnel who staff those areas.

A more recent addition to the back office is the information technology department. This area is often responsible for any type of electronic network that operates within the company, as well as managing telecommunications functions for the business. An IT department is also often involved in the selection and installation of various types of communication equipment, including computers, phone systems, and other equipment related to the communications process.

The designation of a back office does not mean the functions managed in this area are of little importance to the well-being of the company. In fact, back office functions make it possible for the remaining components of the business to function properly. For this reason, many businesses consider the back office to actually be the operational foundation of the company, and go to great lengths to make sure it is functioning at maximum efficiency.