E-commerce and Merchant Accounts - A Primer for Small Businesses by Jason Kern

So you've got this idea to sell online and you're going to make zillions. Maybe you want to see if your idea is going to be the next wireless mousetrap. What do you do now? Well there's a huge amount to cipher through and marketing is anathema to productivity, especially when it comes to the internet. This high-level article should answer some of the basic process questions that are asked by clients who are just starting to sell online. I will save detail about SSL certificates, server configurations and encrypted data for another article. Here's the scoop on what to know before you even begin to explore developing an online store.

Let's start with the banking: Save yourself some headaches by making some early and informed decisions about your banking solution. This area is often overlooked but it makes more sense to start with your destination in mind. The bank is where your cash is, and that's the goal isn't it?

Before you sell anything, whether online or in a store, you have to have a merchant account with a bank. A merchant account allows you to process credit card transactions and actually retrieve the money from credit card orders. Lots of e-commerce providers also supply a merchant account as part of a package deal. Yahoo! and QuickBooks offer such packages and are worth exploring for their convenience.

The way transactions are received for traditional merchant accounts can vary from bank to bank. The process for getting the actual orders to the bank can be a manual, order-by-order process that is done over the phone. This is time consuming and grueling task that will put the most dedicated owner or employee to the edge of a cliff.

Another common way for small businesses to get the orders to the bank is to enter them as a batch through a web interface. Often times a vendor will have several orders from their online store in a spreadsheet or in a format that can produce a CSV, or comma separated variables file. This is a format that most databases can recognize and import. A file like this can often be imported or uploaded to a bank's website and then the orders can be verified and maintained via the bank's interface. This process is a significant improvement over the manual method, but it is still a bit more involved than the automated process that I'll discuss in a minute.

Both of these two processes beg the question, "But how do I get my orders from the site?" Well the answer is, of course, "Lots of ways!" Unfortunately the easy way is also the most risky: having the order form on the site simply send an email to be processed by the vendor. Having an email order with credit card information sent via email completely negates having a secure checkout process. There is no need to bother with an SSL certificate and encrypted info when the final result is sent via totally insecure email. Frankly this way is a very bad practice., though many sites still operate this way.

The developer of your e-commerce site should be able to provide a secure means of retrieving your orders. There are several solutions available and you should discuss the best one for you and make a decision before development or implementation begins. Several out-of-the-box e-commerce solutions are available as open-source options. These solutions can often be plugged into an existing site. OSCommerce is available at www.oscommerce.org for download. This is an exceptional PHP based e-commerce solution with lots of built-in functionality. Zencart is another popular alternative. Since the online purchasing idea is not a new one, there are several suitable options to explore. You may want to take a look at PayPal also. I will discuss this solution in another article. Typically though, if you expect medium to heavy volume, the overhead of a PayPal account is not worth the pay-off of having a real e-commerce solution.

Ideally, your orders will reach the bank in one of two ways. Either they will be manually uploaded via CSV or an automated process within the e-commerce application. This second options will most likely take some development work (smaller businesses often choose not to go this direction for cost reasons). Some of the out-of-the-box solutions mentioned above have pre-built ways to automate orders. These should be discussed in more detail with your developer and explored with your bank's merchant services account manager. The actual implementation of a shopping cart and online catalog is a big piece of the pie but there's a good amount more to consider than simply getting the site to accept orders.
Do a bit of homework and don't be afraid to ask around with developers and consultants. Like any project you'll want to know what to expect at the end.