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Merchant Pacific
Executive Summary
Merchant Pacific is a professional services company located in Melbourne. The company has over 17 years experience in the provision of taxation, accounting, legal and business consulting services. Merchant Pacific targets high net worth individuals and families.
E-commerce was implemented in 2000, when the Head of the Accounting Practice recognised that the uptake and integration of web-based services in the firm could enhance customer service and expedite business processes. In particular, a web-based accounting facility would allow Merchant Pacific to better manage accounting functions for clients and could provide an easier way for clients to comply with Business Activity Statement requirements. Other areas of the business that implemented online procedures included the lodgement of tax returns with the Australian Taxation Office and Australian Securities and Investments Commission (ASIC) forms, general communications with clients and suppliers, banking and payroll. A website was also developed for marketing purposes.
Merchant Pacific installed Broadband Internet via ADSL as it would provide fast and reliable support for the increasing number of web-enabled transactions implemented in the firm. Broadband was also considered a more cost-effective technology than dial-up and would support the image of the firm as innovative and technology driven.
From an establishment outlay of $12,380, Merchant Pacific achieved an operating benefit from e-commerce of $44,865. In 2001, $40,000 of additional revenue was generated due to business opportunities provided by staff having a greater understanding of a client's business through the web-based accounting facility. The uptake of online lodgement of tax returns, banking and payroll has resulted in a reduction of staff time spent on these tasks. Consequently, significant cost savings were achieved.
Non-financial benefits have come in the form of increased customer satisfaction due to the provision of the web-based accounting facility and the improved ease with which clients can meet BAS requirements and financial reporting needs.
The Business
Merchant Pacific is a professional services company established in 1986 by a group of property and financial planning professionals. The company offers taxation, accounting, business consulting, financial management and legal services. Its target markets are high net worth individuals and families.
Merchant Pacific is based in Melbourne and currently employs 21 full-time employees.
Getting Started
The company has used e-commerce since 2000, when the Head of the Accounting Practice recognised that a web-based accounting facility would allow Merchant Pacific to better manage accounting functions for clients. In particular, a 'web cash' book would provide an efficient way for clients to comply with BAS requirements and would eliminate tedious re-keying of financials from the client's accounts into the Merchant Pacific system.
The Head of the Accounting Practice conducted extensive research into the various accounting software products available in the market place. He discussed his needs with various software providers and was able to assess the costs and benefits of a selection of packages by speaking to colleagues and clients.
Merchant Pacific commissioned a web developer to build the company's website which is now updated by the marketing manager. The accounting components of the e-commerce system such as the web cash book, the electronic lodgement system and ASIC lodgements are being administered by accounting staff.
Broadband
Merchant Pacific installed Broadband Internet across the company via an Asymmetric Digital Subscriber Line (ADSL). The increasing use of the web-based accounting facility by clients, means that accounting staff themselves must have fast and stable access to the facility. This is important to enable prompt response to client queries regarding particular cash transactions or issues with use of the facility. Merchant Pacific is better positioned to provide highly responsive customer service for clients that the Head of the Accounting Practice says is "all about speed".
Installation of Broadband technology has been more cost-effective than using dial-up access. Due to the increasing number of web-based transactions carried out by the firm and the greater speed and information carrying capacity of Broadband Internet, there has been significant improvement in staff efficiency for Merchant Pacific.
Additionally, the use of Broadband technology projects a positive image of the firm. The use of web-based transactions is a selling point for potential clients as the company is seen to be providing cost-effective solutions using the latest technology.
Current e-commerce strategy
The e-commerce strategy currently in place at Merchant Pacific features the web-based service for clients, use of the electronic lodgement system, online administrative functions and marketing.
The main feature of the online system is the web-based accounting facility developed for client use. Clients access their own password-protected accounts online, and are able to input their financial data into a web cash book. This data is then downloaded into the Merchant Pacific accounting system, from which accounting staff then makes the necessary balance day adjustments. As a result, clients only need to input cash transactions, while Merchant Pacific staff make adjustments for the accruals.
Through the use of online banking, some customers have been able to simplify the accounting process even further by downloading bank statements from their bank's website. The statements are then transferred into the web cashbook, saving time otherwise spent keying in this data.
For Merchant Pacific's accounting staff, the Internet is also used to streamline many of their service delivery processes. Tax returns, BAS statements, and ASIC annual returns are all prepared and lodged electronically via the web. Accounting staff can also log onto share broking sites to view their clients' portfolios and prepare financial plans with up-to-date data.
Many administrative functions are now conducted online. Email frequently replaces phone and fax as the main form of client communication and for document delivery. Internal finance functions such as banking and payroll are now managed online, as are payments to suppliers and investment transactions made on behalf of clients.
The Merchant Pacific website is used to market the company's products and services. Detailed descriptions of each service line are provided. Visitors are also provided with contact details for registering interest in financial education and investment seminars.
Revenue and Costs
|
|
|
($) |
|
E-commerce Establishment Costs |
|
|
|
Preliminary research |
(8,000) |
|
|
Staff training and education |
(2,400) |
|
|
Domain name |
(180) |
|
|
ADSL installation cost |
(300) |
|
|
Software (web cash book) |
(1,500) |
|
|
Total E-commerce Establishment Costs |
|
(12,380) |
|
Operating Benefit from E-commerce |
|
2001 ($) |
|
Additional Revenue from E-commerce |
|
40,000 |
|
Cost of sales |
(24,000) |
|
|
Gross Profit Contribution |
|
16,000 |
|
Add: E-commerce Cost Savings |
|
|
|
Online banking |
6,500 |
|
|
Staff time in preparing BAS |
32,000 |
|
|
Total E-commerce Cost Savings |
|
38,500 |
|
Gross Benefit from E-commerce |
|
54,500 |
|
Less: Ongoing E-commerce Costs |
|
|
|
Amortisation of capital expenditure * |
(3,095) |
|
|
ISP and web hosting |
(540) |
|
|
Software applications (licence fee) |
(4,800) |
|
|
ADSL & ISP |
(1,200) |
|
|
Total Ongoing E-commerce Costs |
|
(9,635) |
|
Operating Benefit from E-commerce |
|
44,865 |
* Note: Capital Expenditure is amortised over a 4 year period
In 2001, Merchant Pacific generated $40,000 in additional revenue from e-commerce. As financial staff have access to the cash transactions of clients' businesses they have a greater knowledge of business issues and changes in financial position. As a result, additional fees are generated from the subsequent provision of value added financial services. This has contributed $16,000 to gross profit.
In 2001, Merchant Pacific achieved cost savings of $38,500, all of which are due to reductions in staff time. The company estimates that the uptake of online banking has saved $6,500, being 5 hours per week in staff time saved travelling to the bank and manually administering the printing and distribution of cheques to creditors. By utilising electronic preparation and lodgement of BAS statements to the ATO, $32,000 is saved, being 1 hour for approximately 40 BAS statements sent every quarter. Staff are then able to engage in other chargeable work, hence the above saving is the opportunity cost of their time.
Ongoing costs totalled $9,635 in 2001. These costs were related to support of the e-commerce infrastructure. The most significant outlay was in rental of the web cash book software of $4,800. Other expenses include $1,200 for rental of the ADSL line, and $540 for website hosting. In addition, $3,095 has been allocated to the amortisation of capital expenditure.
Since 2000, Merchant Pacific has invested $12,380 in the implementation of e-commerce. Approximately 40 research hours were spent by the Head of the Accounting Practice in assessing the various software products and online capabilities available on the market ($8,000). The majority of start-up costs were allocated to establishing the web-based accounting facility, including purchase of the software and web development ($1,500) and 16 hours of staff time spent in software training ($2,400). In addition, the installation of ADSL
cost $300.
Non-financial benefits
The web cash book has proven to be a successful feature of Merchant Pacific's e-commerce system. Clients have appreciated the ability to have their cash books automatically integrated with their BAS, making tax compliance a more streamlined process. The 40 clients who are currently using the web cash book have been satisfied with the system. By being able to monitor the cash inflows and outflows of a client's business, accounting staff gain a more intimate understanding of client business issues and are better equipped to provide financial advice. The Internet also allows accounting staff to monitor changes in share prices and managed fund unit prices, which in turn places staff in a better position to provide accurate advice based on real time figures. This enhances service delivery to clients as staff can also respond promptly to any developments.
Use of the electronic lodgement system for BAS and annual tax returns with the ATO results in faster turnaround time for the processing of assessments and refunds. Staff productivity is also positively impacted as staff spend fewer chargeable hours in performing administrative tasks such as correspondence with the relevant regulatory bodies.
The Head of the Accounting Practice believes the e-commerce initiative has been particularly effective in improving client satisfaction with Merchant Pacific services. Clients have responded positively to the web-based accounting facility and it has enhanced client relationships with the company. The facility also provides a selling point for business development purposes.
Challenges
Merchant Pacific has not encountered any significant challenges in implementing the
e-commerce system. The Head of the Accounting Practice says operating the system has been "surprisingly simple" for the company.
Future
Merchant Pacific intends to enhance the marketing capabilities of the e-commerce system. Clients will be sent electronic newsletters by email informing them of industry developments and new products and services. It is planned that clients will also be able to access newsletter archives online. In addition, an upgrade of the website will enable clients to book and obtain information about Merchant Pacific's investment seminars online.