Thursday, 28 March 2013

Post-Budget Blues for Businesses


Another budget goes by and commentators are still picking over the bones of the Chancellor’s announcement. As it is to be expected, spin and hubris emerges from all the expected channels but cutting to the heart of the message, it looks like 2013 will be seen as a good budget for small businesses, with the cuts in corporation tax and National Insurance being nearly universally welcomed.

Taking the budget in isolation, not many would disagree with John Walker from the FSB that this helps ‘businesses grow and create jobs’ but is this really enough to resolve the years of apathy, neglect and mistreatment many small businesses have suffered over the last five years? Who is to blame for this malaise can – and will – be hotly debated right into the next election and is certainly a complex picture. Looking at things from within the Financial Services industry, a clear and uncomfortable hypothesis has emerged:

The Global Financial Crisis and the subsequent Financial Services ‘overhaul’ may ensure that the big banks are more resilient BUT it has only made life more difficult for the average UK small business. 

Think about it. The payment issues faced by SMEs – late payments, increased fees and unavailability of credit - are getting worse whilst many sectors are facing a collapse in demand as their customers tighten their belts. In parallel, banks have begun divesting many of their business units to third parties, either for commercial reasons or because the government has their foot firmly on their throats!

To give just one example of what this means for a UK SME - you’d have thought that a business deciding to accept credit and debit cards via a merchant account from their website would require a single call to their bank who would arrange to set up this facility within a couple of days. Not so. All but one bank has sold off their card processing arms.

This means a call to a completely new company, a lengthy application process of 4-6 weeks and once you have the merchant account and it bears nothing in common with their business current account they already have. Double the number of accounts the business has to manage, double the reconciliation, double the hassle and – more likely than not – double the costs!

Throw in other financial services that a an SME may require like loans, corporate card programmes, currency services and the network of suppliers quickly becomes unmanageable. There’s a clue in our name but we believe that cash flow truly is the most important (two) words for any business and yet the status quo only serves as blocks to businesses accessing their money.

Over the next few issues, we will be investigating the payments issues facing British SMEs and how the market is shaping up to help ... or hinder ... them in their quest to make their businesses grow. In the meantime, we’d love to hear your opinions and suggestions on what businesses like ours should be doing to help SMEs. Join the debate at @cashflows_news

Thursday, 21 March 2013

Part 3 – So how does an e-commerce payment work?

In the third installment of our new to e-commerce series of blogs, we thought the natural next step for this week would be to explore exactly how an e-commerce payment works.

We know it is important for a business to understand and be able to manage every process it goes through, and the journey of a payment is no different. By understanding the route a payment takes from your customer to your bank account it enables you to highlight any potential hold ups in this process, which ultimately means a better buying experience for your customers and faster cash flow for your business.

So in order to dispel the mystery surrounding the path of a payment, we have outlined this process below so you can start to cut through some of the jargon that you may hear.

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.
  • Payment confirmation: 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 payment's 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.
The journey of a payment is just one small element in the financial set up and running of a business, however if it is understood and streamlined then it can make a significant positive impact to a businesses cash flow.

Friday, 8 March 2013

How to avoid the pitfalls of E-commerce! Part 2

As promised, here is your second instalment of guidance CashFlows has created on e-commerce and how your business can make the most of it.

Hopefully by now you will have had time to read last week’s blog post on what you should know before taking your business online? We thought this would be a great place to start our journey of guidance through the sometimes tricky world of e-commerce.

So where next? As the flipside to top tips before starting to sell online, we thought we would explore the common pitfalls that businesses fall foul of when setting up and running a business online to hopefully stop you from making those same mistakes!

So what are the common pitfalls and how to avoid them?

  • Poor marketing: internet and mail order start-up costs can be low compared to conventional retail, but you must ensure you market your business effectively or you will not make a profit. There are many ways you can achieve this without having a large budget, including:
    • Content driven marketing: This includes creating impartial useful content aimed at your target customers in the form of whitepapers, infographics and top tip guides.
    • Social media: This is also a great way of interacting with your customers, but make sure you don't fall into the trap of spreading yourself too thin, identify which sites are most applicable for your business and concentrate on them or you are in danger of creating content on sites that don’t contain your target audience and you just create irrelevant noise! 

  • Poor stock management and fulfillment: a customer places a lot of trust in your business when ordering online that they will receive it in the timeframe and condition you state. Ideally your website should be linked to a back office stock control system so when a product runs out, it will automatically be clear to customers on your website so you’re able to manage their expectations. Equally important, you should avoid overstocking, buying equal amounts of similar products regardless of their sales potential as this will just create an unnecessary backlog of products.

  • Failure to meet customer service requirements: unless you deliver on time and have good practices and procedures for handling returns and customer complaints, you won't win repeat business and could cause unnecessary and time-consuming disputes.  Ensure you are always honest and clear with your customers on your website so that they enjoy a consistently positive and memorable customer experience. Make sure you also display your terms and contact information clearly on your website so customers know what to expect, which will help to and reduce the amount of complaints. This also helps protect your business in the event of disputes arising over non-delivery.

  • Not asking enough questions at the start: This is the biggest pitfall that many businesses fall into when starting an e-commerce business is not asking enough questions from all suppliers and providers who will be effecting their business. Knowing what terms you have, what the penalties will be to exit from a provider, what your monthly fees will be, what flexibility you have to grow with a provider are all key questions you need to be asking before signing any contract whether it is for a shopping cart or a business bank account. The more questions you ask the more you know whether that provider is right for your business, so it pays to be pedantic!

Look out for next week’s instalment!