Partner Article

Getting started in e-business: part 2

In part 2 of the series, Neil Graham, CEO of Accountancy firm CashFlows, explains how to get an e-business started.

The process of setting up an e-business and allowing your customers to purchase from you is simple as you will just need three basic things:

Company website - this will allow shoppers to browse and purchase the products or services they want to buy;

Payment Gateway - this is connected to your website and securely sends online payments for authorisation to your acquiring bank;

Merchant Account - is a bank account specifically to receive the funds you accept online and is completely separate from your normal business bank account;

Business Bank Account - this is where the funds from your merchant account will be transferred to on a regular basis for you to then use for your business.

In addition to sourcing these key services there are also several other things you will need to consider before launching your online shop for trading. These include:

An e-commerce strategy; when you are starting any new business you would create a business plan to ensure you set clear objectives and goals for the business and a strategy of how you are going to get there. Approaching e-commerce as an additional payment channel is no different and the same thought and planning needs to go into it. You need to set up clear objectives and strategy for the channel including how much you aim to sell per month, what products and services will be available, who your target audience is and how you are going to reach them, how you are going to raise the profile of your site and that customers can purchase online.

Set out clear processes; before setting up your shopping cart and payment gateway ensure you have thorough processes for all aspects of the selling cycle including how you will fulfill orders and post them out which will help you advertise accurate delivery times for your customers, timelines for updating copy and advising of out of stock items, how you will reconcile both your merchant account and business bank account and how you will be able to report on sales and usage on your website.

Find your e-business position; in order to stand out from the crowd you need to carry out market analysis to assess where the gaps are in the market and how you can maximise on these to give your website and products a competitive advantage. You should consider what sells well online and why does it sell well? Who’s your target audience, how are you going to reach them and what is their preferred browsing device? If you can ascertain this and keep this in mind when building your online shop then you are sure to make your website stand out and ultimately more profitable.

The online marketplace; the online marketplace is not like the high street. Potential customers share information about online products and services using blogs, social media and online reviews. Look at competitor websites and ones you like to see what they are doing right and how they are attracting customers. The key is to make your website easy and appealing for customers to find what they are looking for. When creating content for your site ensure it has a consistent tone of voice throughout, and this is carried on in all your communications and content as it will allow customers to recognise and understand your brand.

How does an e-commerce payment work?

Accepting credit or debit cards from your website goes through a number of different stages that are described below. These steps debit your customer’s account and pay the funds into your bank account.

Company website: the online shopper adds a product/service that they wish to purchase into the websites shopping basket. Once the customer is ready to a make a purchase they go to the website checkout. The purchase details are then sent to a Payment Gateway to process the payment.

Payment Gateway: the shopper is directed to the Payment Gateway where they choose a payment method and enter their payment details. The Payment Gateway sends the payment details to the business’s Merchant Account provider, who sends them via the card schemes to the shoppers card issuing bank for authorisation.

Card Issuer: The card issuer will check if the card details are correct, the cardholder’s account has sufficient funds and that the card hasn’t been reported lost or stolen. If everything is OK, the card issuing bank authorises the payment requested, and debits those funds from the shopper’s bank account.

The confirmation of the payment is sent to the Payment Gateway, which notifies the shopper and the business that the payment has been authorised - normally via a confirmation screen and an email. Businesses should only dispatch goods to the shopper once they have received notification of the payments’ authorisation.

Merchant Account: the funds for the purchase are then sent from the shopper’s card issuer, to the business’s Merchant Account. This can take 1-2 days to show in the Merchant Account.

Business Bank account: from the Merchant Account, the funds are paid into the business’s bank account, normally with a short delay that’s specified by the Merchant Account provider. The Merchant Account provider will deduct the cost associated with processing the payment with the card schemes - normally a small percentage of the value of a credit card transaction or a flat fee for a debit card.

This was posted in Bdaily's Members' News section by CashFlows .