Catching Up With the E-Commerce Train? Consider This
You can make up lost ground by getting on-line, but know the turf first.
In the current economic environment, businesses of all sizes are seeking ways to improve the bottom line. Companies that haven’t implemented an e-commerce strategy may be missing opportunities to increase sales and reduce expenses.
Simply stated, e-commerce is the buying and selling of products or services electronically, typically over the Internet and computer networks. More often than not, it incorporates some form of electronic payment. In its broadest definition, e-commerce also includes supply-chain management, Internet marketing, electronic data interchange [EDI], inventory management systems and automated data collection systems.
Whether it’s business-to-business or business-to-consumer, what makes e-commerce attractive to most businesses is reach. Any business that launches a Web site to sell goods and services dramatically expands its market—your business is immediately global, no longer constrained by traditional business hours, weekends or holidays—it’s 24 hours a day, seven days a week, even on holidays.
Business-to-Business: Launching a B2B e-commerce strategy may appear the easiest to implement; certainly you know your business partners. Leveraging the real business benefits of B2B e-commerce, including supply-chain and inventory management, may prove more complex. Another challenge here involves electronic payments. The unfortunate reality is that many small-to-mid-size businesses still prefer paper checks over electronic payments. But if your AR/AP or accounting packages can support electronic payments, more specifically Automated Clearing House [ACH] payments, and straight-through-processing or EDI, the benefits can be significant. An ACH payment assures that funds are deposited directly into your bank account, eliminating the need to physically deposit checks, while straight-through-processing, or EDI, eliminates many steps associated with accounts receivable reconcilement.
ACH payments, also known as electronic funds transfers, allow funds and payment-related data to flow electronically from the payer’s bank account through a direct bank-to-bank network to the payee’s bank account. Direct Deposit via ACH is the most familiar ACH payment. While not a B2B payment, the same network facilitates all ACH payments and the process is essentially the same.
ACH payment-related data can be electronically passed to the payee to facilitate account reconcilement. Payment-related data can also be obtained directly from your bank, through an online banking platform or via Web sites designated by business partners. Even if your systems cannot support straight-through-processing, an ACH payment sent directly to your bank account is preferable to the manual process of depositing physical checks.
Credit- and debit-card payments are also electronic payments, but straight-through-processing capabilities are somewhat limited and the fees associated with these transactions are generally higher than for ACH.
Business-to-Consumer: It’s hard to imagine a business today that does not have a Web site. As noted, extended reach is one of the most significant advantages of B2C e-commerce. Any business with an online presence increases its market potential far beyond the customers who are aware of its physical location. An e-commerce strategy can also reduce costs associated with your sales force, aid in inventory management and facilitate targeted marketing.
Increased sales are without question the primary motivation behind an e-commerce strategy. But you need to get paid for those, and credit and debit cards are the most commonly accepted method of payment for on-line sales. However, other payment methods that may prove more cost-effective for businesses and are worth exploring include PayPal and Secure Vault Payments, a customer-initiated ACH payment.
Realistically, there are challenges associated with B2C e-commerce that do not exist in a brick and mortar environment; a Web site, data and transaction security top the list. Maintaining Web site, data and transaction security are musts for any business engaged in e-commerce. The truth is, businesses are legally and contractually obligated to maintain such security.
If establishing or enhancing your e-commerce strategy is one of your business objectives, a great place to start is having a conversation with your bank. Your relationship manager may not have all the answers, but he or she is a valuable resource and certainly understands payments.
Ann-Marie Bartels is chief executive officer at EPCOR-Electronic Payments Core of Knowledge in Kansas City.
P | 816.595.7616
E | ann-marieb@epcor.org
Return to Ingram's August 2012