Category: Management Notes

E-Business plan for an E-Commerce company typically involves creating a document to use to obtain financing and start the business. Using the resources and tools provided from mentoring organizations such as SCORE.org, small E-Business owners can develop a comprehensive E-Business plan to get an online business up and running efficiently.

These are the way that planning E-Business

1. Executive Summary

Writing a business plan typically starts with downloading a template or developing a simple format. Alternatively, the Small Business Administration provides an online wizard to generate a plan for you. This tool guides a potential E-Business owner in describing his E-Business’ objectives and goals. Effective small business owners create an executive summary that clearly states how they intend to overcome problems commonly associated with online businesses, such as difficult-to-use websites and inefficient distribution systems. An executive summary usually includes a mission statement that explains the company’s primary purpose. It lists the names of company founders and their roles as well as office locations. It also provides graphs and charts to show projected growth plans.

2. Market Analysis

To conduct a market analysis for your E-Business, research online companies serving the industry in your area of expertise. For example, a budding E-Business owner might search the Internet to find out how many other companies supply the same type of products and services. This will give him an idea of how much competition is out there, and whether there is enough demand to support another company. After learning about other businesses, write a description of how you plan to differentiate your E-Business from others. This will help you build a compelling story that investors find attractive.

3. Company Description

The company description section of an E-Business plan describes how the business owner plans to organize and manage his company. It articulates the vision for marketing, selling and distributing the website’s products and services, and lists the features and benefits to customers. The plan should also describe research and development activities the founders have conducted so far, as well as activities planned for the future.

4. Financial

The financial section of an E-Business plan states the budget. If the business owner seeks funding, it lists the amount required and the projected return on investment for the online business. This section also identifies the costs associated with building the e-Business website, including desktops, laptops and mobile devices. It can list free or low-cost tools as well. For example, websites such as Homestead, Openxcell and Free Webstore provide functions to set up an online shop and accept payments for it, using applications like Google Checkout and PayPal.

5. Regulations

Writing an E-Business plan also involves researching the rules and regulations associated with conducting business online. The Small Business Administration Online Business Law website provides details on these laws. You should learn how to avoid legal and financial liabilities, how to conduct business securely, how to protect your privacy, and how to adhere to copyright and tax laws. Conducting business online usually means working in the global marketplace. An effective E-Business plan proposes a strategy for shipping products overseas and handling taxes, duties and international laws. It also describes a plan to collect sales taxes when necessary.

Framework for Successful Ecommerce Implementation and Controlling

1. Strategic business planning and roadmaps

Strategy is about making the right choices that will help reach the stated business objectives.

There should to be a clear cut vision, mission and objective about what will be achieved, in how much time, within what budget, identification of the right resources for and constraints in the face of execution of the strategy mentioned in the business plan, and what elements will be considered for roadmap.

Knowledge and deep understanding of the digital marketing tools and techniques that will help in reaching and acquiring customers is required. Your business must reach out to customers who are online across multiple dimensions and devices.

So, the assumptions considered in preparing the strategic business plan should be in alignment with the ecommerce industry’s norms and trends.

2. Technology selection/ website audit and analysis

In order to provide the maximum benefit to the end customer, your chosen ecommerce technology should be fully capable of being customizable, and be able to complement the business model, and adhere to the existing best practices in offline retail.

If you’re a retailer taking the first-time plunge into ecommerce, various functionalities on the e-commerce website should be carefully thought over based on the industry, audience being targeted, various customer segments who may be buying the offered products and services.

With respect to retailers who have implemented an ecommerce strategy and have not yet received the rewards of the complete capability of the ecommerce technologies, there needs be a complete assessment of how the website can perform better by examining the store front and customer flow, analysis of competing websites, identification and implementation of solutions based on the gap analysis carried out (‘as-is’ and ‘to-be’). It is equally important to measure and monitor the process that was made because of the implementation of the suggested changes.

3. Customer acquisition

Online or popular digital marketing encompasses multiple tools for reaching out to the new generation of customers, who are actively engaged in using multiple devices, through search engine optimization, search engine marketing (paid advertisement that includes both cost per click and cost per thousand impressions), social media marketing (that includes both cost per click and cost per thousand impressions), email campaigns, display advertisements using various ad networks, referral programs and re-targeting campaigns.

Going by the sales principles of AIDA (awareness, interest, desire and action), it’s important to note that the cost of customer acquisition will be very high for brands and retailers that are newly establishing their product offerings exclusively online.

However, for brands that are well established offline and are pursuing ecommerce strategy, the cost of customer acquisition is lesser compared to the new entrants.

4. Customer engagement

Customers these days are actively seeking to engage with brands to understand the core benefits and unique value proposition that the brand offers, discount and offers during special seasons, a robust support mechanism for queries/clarifications regarding the products displayed and interaction with customer support executives to know more about policies on returns and exchange, etc.

Engaging customers through various social media channels also instills superior trust in the minds of customers.

5. Customer retention

With the advent of sophisticated e-commerce technologies, new age retailers will be able to leverage an almost one-to-one customer experience and that’s the best a customer can really expect.

However, it should be noted that to fully leverage best-in-class technology, there needs to be a constant effort to look out for features and functionalities that will enhance the customer experience.

6. Optimization based on key metrics

Some of the key metrics to measure the health of an ecommerce venture are the total revenue generated, cost of customer acquisition, % of customers converted, and % of customers entering the website through various channels.

However, these metrics may vary significantly based on the business objectives and so every business needs a fully customized approach for defining the key metrics and further analysis.

Once these are defined and there are a substantial number of customers visiting the website, a deeper level of optimization is needed at 2 levels on the technology and the business front.

• Technology: This generally includes optimizing the page load speed, shopping cart, check-out and other web pages, a/b and multivariate testing, etc.
• Business: Optimization here includes analysis of the total revenues generated, total spends for running the e-commerce operations, optimizing the gross net margins, conversion rates from each of the various channels, customer loyalty and retention rates, rate of repeat purchase, frequency of repeat customers (across multiple dimensions), % of carts abandoned, etc.
• There are a lot of features and functionalities to helping online retailers improve these numbers. There is a lot of research evidence supporting the incorporation of features like reviews and ratings, and display of the right products either through up-selling or cross-selling.
• Based on the statistics, 47% of shoppers read product reviews prior to their online purchases and 63% are more likely to buy from websites with online reviews or ratings. Similarly, online companies that leverage a recommendation system can increase sales by 8-10%.

7. Business analysis and customer insights

The final step in the entire process is about fine-tuning and understanding the product categories that have performed well compared to other products displayed in the webstore. Assessing this is crucial since each of these categories and products within those categories occupy the prime real estate in the online world – the web store.

• It also should consist of understanding the customer segments, demographics, profitable customers, source of channels through which the profitable customers came to the web store, % of revenue each profitable customer contributes to and the marketing spends that has gone into acquiring these customers.
• These metrics are only a small representation of a larger list that can be optimized further. These metrics vary based on the business needs and require a customized approach for defining, monitoring and optimization.

Getting buyers to visit, buy and keep buying is the essence of marketing for websites selling things online. When people share your content with their friends, your campaigns gain far more reach at no additional cost.

Selling online requires a specialized marketing mix but the same principles can be applied to almost any website.

1. User experience

First thing’s first. If customers can’t figure out where to go and what to do on your website then they won’t stay or come back. By definition that means they won’t buy anything, and they definitely won’t be referring their friends to your store.

When it comes to selling things online, you don’t have the luxury of in person conversations or salespeople, so you need to fill those gaps in the customer experience with a great user experience. Remember that a great user experience doesn’t mean fancy or expensive design. It just means having a logical and intuitive workflow.

With a little bit of thought and planning you can even replicate in a reasonable way some of the elements of an in-person shopping experience on your site.

2. Design

Your store design and user experience go hand in hand. Not only should the layout and navigation of your site be easy to follow, but the first aesthetic impression you leave on your customer counts too. Product photos should be clean and professional, your font and color selections should all work together, and everything on your site should look like some design thought was put into it.

If you’re not a designer yourself, this is an area where it pays off to bring in some professional help.

3. Content

Good content is one of the most strategic things you can add to your online store. Content helps users find your store and also helps users make the decision to buy from your store.

Content helps sell your business, your expertise and your products. This includes everything from the copy, to the images and video you use on your site.

Another great place to contribute content is through a store blog. If you’re looking for a hand in crafting super shareable content here is a technique we’ve come to know and love called the skyscraper technique.

4. Search

If your business is online, there is one marketing tactic that you absolutely cannot afford to ignore. Search. Search engine marketing and search engine optimization are critical to the discoverability of your business.

Consumers are now trained to ask Google all of the questions they have in life. This is especially true when it comes to shopping and product questions. Knowing how to make your site easily searchable by Google and other search engines (like Bing and DuckDuckGo) should be top of mind when it comes to any online marketing strategy.

5. Email

With the breadth of choice out there for marketers, some of the older, proven, tactics fall to the wayside. Email is an example of one of those. I‘m amazed by how often people I advise are surprised by the effectiveness and the engagement levels that can be generated by email marketing.

I think the world of business has had the fear of being called a spammer drilled into them, to the point where many businesses actually overlook their most valuable marketing asset their opt-in subscriber list. Remember customers who have opted-in to communications from you expect just that. Communication from you.

More than ever consumers are reading and catching up on email through a mobile device. Here’s some advice on making sure your messages are coming in clearly.

6. Social Media

The last thing the world needs is another blog post with advice on social media. So I’ll just leave it at that. Social media is no longer a fad, it’s a must when it comes to your marketing mix and marketing channels. Here are some thoughts on how to make the most of it.

7. PR and Publicity

Now we’re getting a bit more old school. Public relations (mentions on news outlets, blogs and other news outlets) can be a huge help for businesses starting out. They help to get you more search juice when it comes to Google and SEO and also more importantly help to establish credibility for your brand in the eyes of consumers.

Here’s some advice on creating a simple (but effective) PR strategy.

According to recent data, E-Commerce spending has risen to $2.1 trillion in the past few years and will reach $5 trillion by 2020.

Such rapid growth promises a great future for the Indian e-commerce industry signifying a strong market and increased customer demand. Despite these growth trends, many e-commerce businesses fail to take off within their first year. It is worth exploring the various challenges which the ecommerce.

Over the past 10-15 years, electronic trading platforms have emerged in the depths of large enterprises as a system of resource allocation between departments. Shoes, furniture, consumer electronics – there is almost nothing that cannot be ordered on the Internet. But the consumption in the net has also dark sides. Bogus orders, fake websites, illegal purchases, etc. are also more frequent. In such a case, the protection of user data has also become a major challenge in the online world. With the growing financial services, the type of payment your business accepts also effects the e-commerce today. Payment solution like My Payment Savvy provides a custom payment solution for your business which can maximize your conversion. We have listed some of the major challenges facing e-commerce today, and their solutions.

1. Dependence on Google for traffic

Google is the world leader in search engines, and by extension, responsible for the visibility of websites. More than 50% of online shops are dependent on Google for traffic. Despite plans for new search engines that are competing with Google, the supremacy of Google seems destined to last a few more years. And this can impact e-merchants when Google changes the rules of the game. Recently, there was the requirement to switch to HTTPS to make Google Shopping campaigns, in addition to displaying the non-security of data in the Chrome and Firefox browsers. Unencrypted web pages that query passwords, bank details or credit card information was marked as “unsafe” by major browsers such as Google Chrome, Mozilla Firefox, Microsoft Edge and others. Therefore, it is recommended changing the traffic acquisition channels of websites, so as not to depend solely on Google for visibility and transactions.

2. Absence of online verification of customers

The genuineness of the new customers is questionable in an online portal. When a visitor signs up, e-websites have nothing but the address and phone number entered by them. If those visitors are a scam, and if they order cash on delivery purchases to a fake address, it can be a huge loss for the company. It becomes impossible to contact them if the number is also fake. Therefore, to be at the safe side, e-websites or online portals should take all necessary steps required to decline these risks. It is necessary to recognize bogus orders, fake phone numbers, invalid zip code, etc. Alternatively, they can install services or software that automates a call on placing an order. These services also send some verification code through SMS to validate the customers’ identity. It can help in reducing the number of cancellation and bogus orders which may otherwise be expensive for the business.

3. Maintain Customer Loyalty

Customer loyalty is an important indicator of firm performance. The modern consumer is so sophisticated and busy that showing content or sending offers that are not relevant to him at all is a real failure. If the online store does not understand what the potential consumer wants or does not consider it necessary to understand, then it may cost the store a customer. Unlike normal street shopping, the buyer and seller do not see each other in online shopping. Therefore, it is difficult to build trust between them. Building trust, therefore, can take some time and transactions in online shops. You can also earn customers loyalty through excellent customer service. By displaying your address, answering calls, adding a live chat option on your website, etc. can also help you in building trust among customers.

4. Customer Service

In a general store, the customer leaves the store with his product. However, this situation is not the same as e-commerce. In e-shopping, the user sends you money for a product he does not have yet. He waits impatiently for the arrival of his order. Problems can still arise if the delivery service provider has lost a package, or the product has been damaged during transport, or you have simply fallen behind before shipping. This can cause customer dissatisfaction, which will then need to be managed. The idea is to be transparent and responsive and to keep customers abreast of the situation as soon as possible. If you are in a discussion with the delivery provider to find a lost package, keep the user informed of your steps, do not wait for him to come to the news. Similarly, if you are late in your parcel preparations, inform him of the expected date of shipment. If the product has been damaged during transport, quickly propose a solution according to your legal notice, whether a total or partial refund or a replacement. Internet users who have received good communication in the case of litigation generally keep good relations with the e-commerce site, 95% of the negative opinions turn into loyal customers if a solution has been made. The responsiveness of the after-sales service greatly affects the image of a company.

5. Plan your digital strategy

In the continuity of the multidisciplinary profession, the e-merchant forgets to promote and animate his merchant site. E-merchants should determine the communication channels to be used (social networks, newsletters, partnerships, online advertising) and define the messages to be transmitted, set up editorial planning, create the visuals, etc. Getting help from an outside provider for some of these tasks can help to free up time for managing your e-commerce site.

The everyday life of the e-shopkeeper is filled with things to manage, to plan, and lots of small tasks to do. As such, it requires outstanding strategies to survive in the e-commerce competition.

We all have dreams, be it owning a car, a house, child attending a prestigious college or building a healthy retirement corpus. But we seldom pen down these goals and work towards a plan for achieving them. These can be termed as your life goals.

Financial Planning

Contrary to popular belief, financial planning is not just investing. It is a process. It allows you to manage your finances in such a way that you link it to your goals. Making a standalone investment in a life insurance product means nothing if you do not know the amount of cover you need, or whether the maturity proceeds are adequate, or whether you need a life cover.

The process of financial planning should help you answer three questions. Where you are today, that is, your current personal balance sheet, where do you want to be tomorrow, that is, finances linked to your goals, and what you must do to get there, that is, the asset allocation and investment strategy that will help you achieve your objectives.

Developing a financial plan needs a consideration of various factors. First, your objective or the purpose for which the investments are being made. The time period, too, is critical, since the longer the period of investment, the higher is the ability to absorb risks. Also, one of the most important factors that many of us did not account for earlier is inflation. The level of inflation can deplete your return from investment considerably. Today’s expense of Rs 10,000 would be Rs 43,000 in 30 years if the inflation rate stays at 5% per annum.

Mutual funds as a financial planning tool: Mutual funds have managed to constantly deliver financial planning solutions to investors by way of various products that they offer. Contrary to popular belief, mutual funds are not an asset class. They are vehicles that allow you to execute your financial plan.

In terms of the risk-return perspective, not only can you choose funds which are as safe as you want (such as liquid funds), you can also invest in funds that can be as risky as you want (such as sectoral funds). In between there are various types of funds that have different levels of risk. Not only are they cost efficient, they are tax efficient as well.

Investment tools such as systematic investment plans (SIPs) and systematic transfer plans (STPs) are ideal for salaried individuals who want to invest consistently and ride through market volatility. By rightly identifying the risk you are willing to take, your liquidity requirement and your return expectation, you can match a fund to suit your investment objective.

Remember to invest in products you understand, and more important, stick to funds that have an established record. Given below are excerpts from the interaction that investors had with the panelists.

How to Create a Financial Plan?

A good Financial plan differs from person to person according to their individual needs, goals and long-term plan. But the steps involved in a creating a sound personal financial plan are by and large similar for all. Let’s look at the steps involved in the creating a financial plan for yourself:

1. Find out your Current Financial Situation

You should be well aware of your current financial status and net worth before setting out to reach your goals. A discussion with your financial advisor will help you understand your net worth and put a spotlight on your priorities. For example, after the analyzing your current financial situation, you discover that planning for the marriage is more important than planning for buying a car. You need to understand your cash flows, income levels, dependants, running loans, liabilities etc. This research will help you prioritise your goals and carve a plan accordingly.

2. Time Frame and Budgeting

For a financial plan to work, it is of utmost importance that a clear timeline is defined. The timeline gives you a direction to reach your set goals. Moreover, the deadlines keep you alert and motivated to reach your goals in time. Along with this time frame, it is important to have a budget accompanying it. A budget gives you an idea about your expenses, spending, and savings that ultimately help you in reaching your goals.

3. Set Goals- Short Term, Mid Term, and Long Term

You must have clear goals in order to make full use of your financial plan. The financial plan is the road that leads you to the targets that you have set. Your goals can be either short-term, mid-term or long-term.

Short-term goals are those goals that you set for the near future. These goals have specific time frames and an objective that you want to accomplish in say a year or two years’ time. There are a lot of short-term financial goals that can be set as per your wish list. For example, save for a family vacation, buy high-tech gadgets, etc. Mid-term goals are those goals that you wish to achieve in the next three to four years. It may include important goals like saving up for marriage or higher education, buy a fancy car, paying off previous debts (if any), or to start a business, etc. As you march on to complete your short-term goals, you can start ideating your mid-term goals and also plan on how you can achieve them.

Long term goals are the ones that might take you considerably more time to achieve than the previous two types of financial goals. Planning for long-term goals such as your children’s future, their education, your own retirement, etc. takes meticulous planning and organization. You can start by setting up short-term and mid-term goals, deliver them on time and then build on it to achieve your long-term goals.

4. Assess your Risk

Investing plays a big role in your long-term wealth management. It’s never too late to start investing. Any investment comes with a risk factor attached to it. Investing Early gives you the ability to take bigger risks and thus an opportunity to generate higher returns. But before investing, one should assess their own risk-taking ability or do their Risk assessment to know their risk appetite. Risk profiling helps you understand how much risk can you take and then invest accordingly. Assessing risk involves many factors such as the ability to tolerate loss, intended holding period, knowledge of investments, current cash flows, dependants etc. Assessment of risk ensures that one stays within the zone defined by risk. This tries to ensure that in the long run, one does not see unexpected action or outcomes in the investment portfolio.

When an investor undergoes risk profiling, they have to answer a set of questions designed specifically for the purpose. The answers to those questions are recorded and used to calculate their risk appetite. These set of questions differ for different Mutual Fund Houses or distributors. The score of an investor after answering the questions determines their ability to take a risk. An investor can be a high-risk taker, mid-risk taker or can be a low-risk taker.

5. Asset Allocation

You should decide the mix of your asset classes such as debt and equity depending upon the risk appetite that one has. The asset allocation can be aggressive (investing mainly in equity), moderate (more inclined toward Debt fund) or it can be conservative (less inclined towards equity). You need to match your risk profile or risk taking capacity with the asset allocation you seek to have in your investment portfolio.

E-commerce is big much bigger than you might think. According to a survey from Pew Research, 35 percent of Indian have made an online purchase, and those numbers are even higher among younger demographics.

Because of this, it should hardly be surprising that more and more entrepreneurs are looking to enter the B2C e-commerce world and are using dropshipping as their go-to method. Dropshipping is an extremely cost-effective method of starting your own online business that can yield big dividends, but it is still largely misunderstood by many would-be entrepreneurs.

By understanding a few key e-commerce terms, you can better comprehend how dropshipping works and learn what you need to do to turn your own dropshipping endeavors into a profitable business.

Without further ado, here are seven key e-commerce terms you need to know.

1. Trading companies and wholesalers

Trading companies and wholesalers play a central role in dropshipping. Rather than ordering and storing your own inventory, the products you sell in your e-commerce store are made available through a third party manufacturer. You feature items in your store, but after the customer places an order, the trading company will fulfill the order. You essentially “buy” the item from the wholesaler, while keeping any profits from your price markups. While you need to be careful to only work with quality manufacturers, this partnership dramatically reduces overhead costs when compared with a more traditional business model.

2. HTTPS

With digital data theft a constant threat, customers are understandably wary of submitting their credit card information to a new site. Because of this, it is essential that you update your e-commerce site to use HTTPS. This system uses either an SSL or TLS protocol connection to provide an extra layer of security for your site, encrypting traffic so that hackers won’t be able to steal any data that is communicated through your platform.

If you don’t offer an HTTPS connection, many potential buyers will avoid your site entirely but worse yet, you’ll put your own information and that of your customers at risk.

3. PPC advertising

It’s one thing to set up a store; it’s quite another to actually get customers to come to it. For dropshipping businesses, one of the best ways to attract new customers is through pay-per-click (PPC) advertising. In a PPC campaign, you create advertisements through AdWords or another similar resource, developing engaging content with keywords that are related to your products or store.

Your completed ads will then appear when a web browser conducts a relevant online search in Google or another search engine but you’ll only pay when someone actually clicks on your ad. The quality of your ad and the amount you are willing to bid for an ad placement will affect where your content will show up in the search results. PPC is one of the most important tools in your dropshipping arsenal the more you do to master this digital advertising method, the more likely you are to achieve success.

4. MAP pricing

While most of us understand the term MSRP, MAP pricing is a less commonly used term however, it is of extreme importance for dropshipping businesses. Because of dropshipping’s low overhead costs, many sellers adopt a strategy of offering deep discounts in an effort to boost sales. However, many manufacturers enforce a minimum advertised price (MAP) agreement. In a nutshell, this means that sellers must agree to not offer items below a certain price. Should you break the agreement, the manufacturer can revoke your selling privileges for their products.

5. Cost Per Acquisition (CPA)

While your marketing efforts can help bring new customers to your store, it is essential that they do so in a cost-effective manner. Cost per acquisition (CPA) refers to how much money you needed to spend to acquire a customer. For example, if you were to evaluate the CPA for a PPC campaign, you would look at how much money you spent on the campaign, and then divide it by the number of conversions you achieved from your efforts.

It should come as no surprise that you should always be trying to lower your CPA, but you need to examine this crucial data point more closely than that. Your CPA should be evaluated alongside your other overhead costs and then compared to how much your average converted customer spends on your site. If your CPA is higher than your average customer spend, it’s time to rethink your marketing strategy otherwise, you’ll only lose money.

6. Responsive design

People use their smartphones for social media and games, but they also use it for shopping. Currently, an estimated 34.5 percent of e-commerce sales come from mobile users, and that number is expected to continue to grow in the coming years, with mobile sales making up the majority of purchases by 2021. This means that responsive design is an absolute must for your e-commerce site.

Responsive website design accounts for the device someone is using to browse your site by adapting the presentation of images, menus and text so that a user can easily navigate the page. Responsive design makes it easy for someone visiting your site to fill out forms, browse items and make a purchase, regardless of whether they are using a desktop computer or a smartphone.

7. Bounce rate

Another important term for understanding the effectiveness of your website is its bounce rate. The bounce rate refers to how many people click away from your site before clicking on any of your links or content. In other words, these people are taking a quick glance at your landing page, deciding they don’t like what they see and leaving before ever having the chance to become a paying customer.

While bounce rates for almost any website are relatively high, you should consistently examine your bounce rate and look for steps you can take to make your site more appealing to visitors. A retail commerce site that uses good targeting should aim to have a bounce rate between 20 percent and 40 percent any higher, and you likely have issues with either your marketing campaigns or the site content itself that need to be addressed.

Conclusion

Knowledge is power, and that is definitely the case with these e-commerce keywords. As you come to understand these important terms and leverage them in your day-to-day business activities, you’ll be able to lay the foundations for a successful e-commerce store and get more out of your dropshipping efforts.

An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic payment for online transactions. Also known as a subcomponent of Electronic Data Interchange (EDI), e-commerce payment systems have become increasingly popular due to the widespread use of the internet-based shopping and banking.

Credit cards remain the most common forms of payment for e-commerce transactions. As of 2019, in India almost 65% of online retail transactions were made with this payment type. It is difficult for an online retailer to operate without supporting credit and debit cards due to their widespread use. Online merchants must comply with stringent rules stipulated by the credit and debit card issuers (e.g. Visa and MasterCard) in accordance with bank and financial regulation in the countries where the debit/credit service conducts business.

For the vast majority of payment systems accessible on the public Internet, baseline authentication data integrity, and confidentiality of the electronic information exchanged over the public network involves obtaining a certificate from an authorized certification authority (CA) who provides public-key infrastructure (PKI). Even with transport layer security (TLS) in place to safeguard the portion of the transaction conducted over public networks especially with payment systems the customer-facing website itself must be coded with great care, so as not to leak credentials and expose customers to subsequent identity theft.

Despite widespread use in North America, there are still many countries such as China and India that have some problems to overcome in regard to credit card security. Increased security measures include use of the card verification number (CVN) which detects fraud by comparing the verification number printed on the signature strip on the back of the card with the information on file with the cardholder’s issuing bank.

There are companies that specialize in financial transaction over the internet, such as Stripe for credit cards processing, Smartpay for direct online bank payments and PayPal for alternative payment methods at checkout. Many of the mediaries permit consumers to establish an account quickly, and to transfer funds between their on-line accounts and traditional bank accounts, typically via Automated Clearing House (ACH) transactions.

Electronic Payment Methods

One of the most popular payment forms online are credit and debit cards. Besides them, there are also alternative payment methods, such as bank transfers, electronic wallets, smart cards or bitcoin wallet (bitcoin is the most popular cryptocurrency).

E-payment methods could be classified into two areas, credit payment systems and cash payment systems.

1. Credit Payment System

• Credit Card: A form of the e-payment system which requires the use of the card issued by a financial institute to the cardholder for making payments online or through an electronic device, without the use of cash.
• E-wallet: A form of prepaid account that stores user’s financial data, like debit and credit card information to make an online transaction easier.
• Smart card: A plastic card with a microprocessor that can be loaded with funds to make transactions; also known as a chip card.

2. Cash Payment System

• Direct debit: A financial transaction in which the account holder instructs the bank to collect a specific amount of money from his account electronically to pay for goods or services.
• E-check: A digital version of an old paper check. It’s an electronic transfer of money from a bank account, usually checking account, without the use of the paper check.
• E-cash is a form of an electronic payment system, where a certain amount of money is stored on a client’s device and made accessible for online transactions.
• Stored-value card: A card with a certain amount of money that can be used to perform the transaction in the issuer store. A typical example of stored-value cards are gift cards.

Pros and Cons of Using an E-payment System

E-payment systems are made to facilitate the acceptance of electronic payments for online transactions. With the growing popularity of online shopping, e-payment systems became a must for online consumers — to make shopping and banking more convenient. It comes with many benefits, such as:

• Reaching more clients from all over the world, which results in more sales.
• More effective and efficient transactions: It’s because transactions are made in seconds (with one-click), without wasting customer’s time. It comes with speed and simplicity.
• Customers can pay for items on an e-commerce website at anytime and anywhere. They just need an internet connected device. As simple as that!
• Lower transaction cost and decreased technology costs.
• Expenses control for customers, as they can always check their virtual account where they can find the transaction history.
• Today it’s easy to add payments to a website, so even a non-technical person may implement it in minutes and start processing online payments.
• Payment gateways and payment providers offer highly effective security and anti-fraud tools to make transactions reliable.

Sounds great, so are there any drawbacks?

• E-commerce fraud is growing at 30% per year. If you follow the security rules, there shouldn’t be such problems, but when a merchant chooses a payment system which is not highly secure, there is a risk of sensitive data breach which may cause identity theft.
• The lack of anonymity: For most, it’s not a problem at all, but you need to remember that some of your personal data is stored in the database of the payment system.
• The need for internet access: As you may guess, if the internet connection fails, it’s impossible to complete a transaction, get to your online account, etc.

E-commerce, as well as m-commerce, is getting bigger year after year, so having an e-payment system in your online store is a must. It’s simple, fast and convenient, so why not have one?

Still, one of the most popular payment methods are credit and debit card payments, but people also choose some alternatives or local payment methods. If you run an online business, find out what your target audience needs and provide the most convenient and relevant e-payment system.

A lot of things happen between the time you swipe your credit card and sign the credit card slip. Everything that happens behind the scenes makes it possible for you to make purchases with your credit card instead of having to go to the bank every time you want to spend money from your credit limit.

A few people/entities are involved in each credit card transaction:

• The customer (you) who presents the credit card for payment.
• The merchant sells you goods or services.
• The merchant’s bank sends credit card transactions for approval.
• The credit card payment network is a liaison between the merchant bank and the credit card issuer.
• The credit card issuer approves and pays transactions.

1. Swipe Your Credit Card for Approval

You present your card for payment by swiping your credit card through the payment terminal. The payment terminal communicates with the merchant bank to ask whether you can make the credit card purchase.

2. Credit Card Authorization

The merchant bank contacts the appropriate credit card network (Visa, MasterCard, American Express, or Discover) to get authorization for the credit card purchase. Then, the payment network contacts the credit card issuer to make sure the credit card is valid and there’s enough available credit for the transaction.

American Express and Discover are the payment network and the credit card issuer, so they approve credit card transactions themselves. Visa and MasterCard, however, do not issue credit cards and must contact the credit card issuer.

The credit card issuer sends back an authorization code for the transaction. If your credit card is declined, you won’t get a reason at the point of sale, just a message that the card was declined. You’ll have to contact your card issuer directly to find out why your card was declined.

The store’s bank sends their communications electronically either through the phone line or through the internet. You may have been to a store or restaurant and heard the screeching and static from the credit card terminal communicating with the merchant bank. Now you know what’s going on.

3. Credit Card Approval

The merchant bank sends the approval message for your credit card purchase, the receipt prints, you sign, and you can leave with your purchase.

When you sign the receipt and leave the store with your purchase, your credit card has only been authorized for the payment. The merchant hasn’t actually been paid and your credit card hasn’t been charged. If you check your credit card online right after you’ve made a purchase, the payment probably hasn’t shown up in your transaction list just yet. Some credit card issuers have more sophisticated reporting systems that will show authorized transactions and may even reduce your available credit by the amount of your recent purchase. It’s more likely that you won’t see the charge for a few days.

4. Batch Processing

At the end of the day, the merchant prints a list of all the credit card transactions that have been made that day and sends them to their bank. The merchant’s bank then sends the transactions to the appropriate payment network for processing.

5. The Credit Card Issuer Sends Payment

The credit card network lets each credit card issuer know what payments are due. The credit card issuer keeps a fee, the interchange fee, as part of its agreement with the merchant. Credit card issuers share the interchange fee with credit card networks. Since American Express and Discover are both the credit card network and the credit card issuer, they get to keep a higher percentage of the fee.

6. The Merchant Gets Paid

The credit card network sends payment to the merchant bank who collects its own fee before depositing the credit card charges in the merchant’s account.

7. The Credit Card Issuer Bills You

Each month, the credit card issuer sends a bill for the charges you made during the month. Then, you pay some or all the charges. If you choose to pay only a portion of the charges, you’ll pay interest on the amount that you don’t pay. The credit card issuer uses the money and interest you pay to pay merchants as new transactions are made.

Master Budget:

The collection of a series of subsidiary or functional budgets into a total or master budget is the outcome of the budgeting process.

The master budget which covers a definite period of time, such as a year, represents the overall plan of operations which the management develops for the company. The master budget formally expresses the managerial policies & goals for a specified period which, with respect to functions & organizational responsibilities are broken down into details.

The master budget together with the subsidiary budgets on completion will be submitted for approval to the budget committee.

Constituent Elements of a Master Budget:

A master budget comprises a number of functional & financial budgets.

Functional Budget: Functional budget is related to a major function of the business. The usual functional budgets are:

1. Sales Budget: The sales in terms of quantity & value which are analyzed by the product, by region, by month, by salesman & by distribution channels are shown by this budget.
2. Selling Expenses Budget: The salaries & commission of salesmen’s, expenses & other related costs is included in this budget.
3. Distribution Expenses Budget: Charges for transportation, charges for freight, warehousing, stock control, wages, expenses & related administrative costs is included in this budget.
4. Marketing Budget: Marketing budget, apart from details regarding advertising, activities related to promotion, market research, customers service, public relations & so forth; also includes a summery relating to sales, selling expenses & marketing expenses budgets.
5. Research & Development Budget: Materials, salaries, expenses, equipment & supplies & other costs which are related with design, development & technical research projects are included in research & development budget.
6. Production Budget: Production budget aims to supply specified quality of finished goods so that the marketing demands can be met. Levels of finished goods stock is specified by the distribution budget & for providing detailed production requirements this can be related with the sales budget. Following from this, consideration of a series of subsidiary budgets becomes necessary:
7. Raw Materials Budget: Appropriate attention to the desired levels of stock is paid by this budget.
8. Labour Budget: This budget ensures that at the right time the required number of employees with suitable skills & of suitable grade will be made available by the plan.
9. Manufacturing Overheads budget: Items such as consumable materials & waste disposal is covered by this budget.
10. Purchasing Budget:While preparing this budget along with the answers to the questions regarding when, where & at what price to buy & how often to buy, consideration has to given to raw materials, consumable items, office supplies & equipments & the whole range of requirements of an organization.  
11. Administration Expenses Budget: Such expenses as salaries & upkeep of office, salaries of management, stationery, telephones, depreciation, postage etc. are dealt with by this budget.
12. Manpower Budget: An overall view of the need of the organization regarding manpower for all the areas of activity for a period of years-like manufacturing, administrative, sales, executive activities & so on, must be taken by the manpower budget. Training expenses budget & recruitment expenses budget can be formulated on the basis of the manpower budget & policies.

Prepare a materials purchase budget for the 3 months- January, February & March from the following information:

(a) Estimated sales of finished products:

January                                   12000 units
February                                 14000 units
March                                      16000 units
April                                         13200 units
May                                         16800 units

 (b) It is required as per stocking policy to maintain at the end of the month a sufficient quantity of finished goods so as to satisfy 25% of the estimated sales for the following month. 3000 units were in stock on 1st January.

(c) The standard requirement of per unit material as per the standard card of the product is:

Standard quantity: Material X            2 kg @ $ 2.50 per kg

                                    Material Y           4 Kg @ $ 1.50 per kg

Stoking policy required the maintenance at the end of each month, of a sufficient quantity of raw materials so that 50% of the production requirement of the following month can be met. The adherence of this policy is always required.

Solution:         
Production Budget
                                                            Jan                   Feb                  Mar                  April
                                                            Units                  Units               Units               Units
Estimated Sales                                  12000              14000              16000              13200
Desired Closing Inventory equal
to 25% of sales demand for
following month                                 3500                4000                3300               4200
                                                        15500               18000              19300              17400
Opening Inventory                          (3000)              (3500)              (4000)              (3300)
Budgeted Production (in units)         12500              14500              15300              14100

                                                    Material Usage Budget

                                                            Jan                   Feb                  Mar                  April

                                                              Kg                   Kg                   Kg                   Kg

Material X @ 2 Kg per unit                25000              29000              30600              28200
Material Y @ 4 Kg per unit                50000              58000              61200              56400

                                                Material Purchase Budget

                                                                        Jan                   Feb                  Mar
Material X:

Usage Quantities (Kg)                                    25000              29000              30600
Desired closing stock equal to 50% of
production requirements for following
month                                                              14500              15300              14100             
                                                                        39500              44300              44700 
Opening Inventory                                         (12500)          (14500)           (15300)
Purchase Quantities                                         27000             29800              29400
Price per Kg                                                      $ 2.50            $ 2.50              $ 2.50
Value of purchases                                        $ 67500       $74500         $ 73500

Material Y:

Usage Quantities (Kg)                                     50000              58000              61200
Desired closing stock equal to 50% of          
production requirements for following
month                                                              29000              30600              28200
                                                                        79000              88600              89400
Opening Inventory                                         (25000)           (29000)          (30600)
Purchase Quantities                                        54000              59600              58800
Price per Kg                                                    $1.50                 $1.50              $1.50
Value of purchases                                        $ 81000        $ 89400         $ 88200