Reducing costs

Financial considerations should be given towards reducing the costs of operating the business. Even though most companies use the Internet to increase their marketing presence, there are many ways to lower operating costs by using the Internet and the technology advancements that the Internet offers. One way of doing this is to lower transactional costs. When customers self-service their accounts, they free up the customer service department’s time and the Sales departments time. This allows them to spend more time procuring additional sales. Further, EDI and XML transactions can be instituted to allow computers to ‘talk’ to one another and therefore alleviate human interaction and human costs. 

Another way to lower costs is to offer information online. This will decrease paper, ink, storage and management costs in the physical realm. Along these same lines, a company could reduce costs by offering online invoices. Companies routinely lose or misplace their invoices. Having an electronic version to send them will decrease time and delivery costs. Using e-mail to communicate with the customer and other business partners will reduce phone-call cost, but it will also serve as an electronic backup in case of further disputes. Also, when a company uses online suppliers to procure their goods, much of the ‘fat’ has been taken out of the equation and costs are typically lower by doing so. One way to buy online is through bidding sites. These sites can offer a company the raw materials it needs to operate, but it can also offer the machinery it needs as well.

Recruiting employees online can save costs as well. Doing research online can reduce the time it takes to come up with an answer. Another great advantage the Internet has in reducing costs is training employees or customers via the Web. Quarterly sales meetings can be conducted via the Web without the added time and expense of traveling. Plus, Webinars can be conducted to train users on using an e-commerce site or educating suppliers on the services offered by ABC in an effort to encourage them to push their products through ABC. These are many ways that the Internet can reduce overall company costs. These elements should be included in a thorough financial and accounting plan.

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A Complete View of Costs Associated with Starting an e-Business Enabled Company
 

Startup expenditures

Even though ABC is a successful brick and mortar business in its own right, there are many expenses associated with starting an e-commerce division of a company. For instance, there are development costs involved. ABC wants to offer its users a unique and industry-leading searching mechanism for finding cogs based on several criteria. This will require development time and money. Further, the graphical layout for the new site will have to be determined. This will primarily be done in house, but a portion of the finished style sheets will be imagined and created by an outside graphic artist. This will require an expenditure. 

A minimal, but necessary, charge will be incurred to obtain a domain registration for the new company division. This project will require time from the marketing manager, e-commerce manager, graphics artist, programming, IT and accounting departments. The time involvement from these individuals is an incurred soft cost. Also, equipment must be purchased in order to service users in an efficient and secure manner. A middle-ware server must be bought and put in place so that credit card numbers are not floating around on the Net. This middle-ware server will also act as a liaison between the e-commerce site and the back-end inventory and financial systems. ABC will also require an additional router, a new hosting provider, and more programmed jobs to run security backups of information. 

These are the starting expenditures that must be considered in a financial plan. Next time we will discuss the operating expenditures.

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