If you’re a freelancer, blogger, or anyone who makes money in the online world, you’re probably familiar with PayPal. Namely, the fees you’ve grown accustomed to paying every time you make any money. PayPal charges 2.9% + $0.30 for every transaction you invoice. Sound small? Last year I paid over $1,000 in fees to PayPal. Holy Moly! It was one of my largest business expenses. Can you think of any other service you used last year that cost you that much money?! Luckily, I figured out a way to bypass these fees and I’m kicking myself that I didn’t discover this sooner. Freelancers, you need this.
The “secret” is that I started using an invoicing software called Freshbooks. I’d known about Freshbooks, but never signed up because there’s a monthly fee you have to pay (it starts at $19.95/month) and I figured I could just continue using PayPal fo’ “free.” Anyways, Freshbooks has a feature where instead of collecting standard PayPal payments, you can collect them as PayPal Business Payments.
The difference?
Instead of being charged that 2.9% + $0.30 fee, you’re charged only 50 cents. 50 cents. Every.single.time. The monthly fee I pay for Freshbooks more than pays for itself in the money I save from this option. Take a look at how setting up an invoice looks below:
That little checkbox is all you need! Woop woop!
Now, this doesn’t mean that none of your invoices go fee-free. If your client pays with a credit card, you’ll still be subjected to the usual expenses. But if anyone pays through this special PayPal feature (there’s always some who do!), then you’ll be saving a whole lot of moo-lah in the long run. Alternatively, if you want to be extra frugal, you could turn credit card payments off altogether and only use PayPal Business Payments, allowing clients to pay with their checking account and giving you more money in your pocket. #winning.
Interested? You can check out Freshbooks right here.
Do you use an invoicing software to bill clients? Which one?
*Note: This isn’t sponsored, I just happen to think this feature is the bomb diggity. 🙂
p.s. How I Went From My Day Job to Full-Time Freelancer in Three Months + Home Office Inspiration
I LOVE Freshbooks! I used it a lot when I was a contract employee during an internship. It’s so easy and effective to use!
I totally agree!!
This is really great to know. I love it when people let us into their little secrets that can help us out so much, thank you!
Rebecca-Louise | Autumn Leaves Blog
Glad to help, Rebecca-Louise! 🙂
What! Okay, thanks for saving my life here. I’m starting up my Etsy business this weekend and definitely needed to know about Freshbooks! Thank you so much!
Circus & Bloom
♥♥♥
Woohoo! You’ll love it, Natalie!
I actually factor the Paypal fee into the contract, or give the option for the client to mail me a check. I’ve heard great things about Freshbooks though 🙂
I do that too. I put in the invoice at the end that they have the option to pay via credit card but need to add the 3% fee on top. The clients who like to pay that way have no problem covering the cost.
This will come in handy if I ever become a freelance. And I spend a lot of money on a bank account management fee. they charge me around 4 dollars a month… and that in Colombian pesos is a lot…
WHAT THE CRAP. I’m getting this today!
I didn’t realize this feature was only for US Paypal accounts though. :/
Ahh shoot I didn’t know that!
I just add the paypal fee as a tax into my final bill and then the client pays the tax as they should, not me.
Ahh interesting! I guess we all have different perspectives on the issue. 🙂
You can also apply for merchant rates: https://www.paypal.com/uk/merchantrate
There are brackets for various ‘fee per transaction’ rates, with the first one starting at £1,500. You only have to apply once and every time your monthly sales hit those ‘targets’ you get discounted rates. It’s saved me a lot of £££
Great to know! Thanks for sharing, Sophie!
Wow, thanks for sharing this. I can use this in the future, hopefully. My blog isn’t earning that much right now so the Paypal fee isn’t so bad from the start. I’ll keep this in mind when I really start earning big cash online. Thanks again.
http://heidepadilla.blogspot.com/
You bet! 🙂
Great advice….now….can you tell me the best way to accept credit card payments on the go? at festivals and events?
Square app!
Third 🙂
second square! (paypal has a reader too)
Waa~ Thank you so much for this Advice Mel ♥!
I’m going to chek it right now in my paypal account; this is going to help me so much in the future 😀
I hope it does help, Cori! 🙂
What a helpful piece of information! I can definitely see myself using this in the future. Thanks!
Glad to help, Stacia! 🙂
I just started using Freshbooks too! I love everything – except having to create invoices for payments where I didn’t need to invoice anyone (sponsored posts, ect).
Wow, awesome tip! I’m checking out FreshBooks pronto!
Woohoo! Hope you like it. 🙂
thank you for this little nugget… i have been using square invoicing… checking this out for sure!!
Awesome! Let me know what you think. 🙂
Bingo! Thanks, Mel!
Oly | TLV Birdie Blog
http://tlvbirdie.com
🙂 Anytime!
Great tip!
Great Tip. However most of my customer’s prefer paying via “Credit card” as not many are comfortable in providing their checking account. I would prefer paying the extra fees versus losing a customer. And new version of PayPal also accepts Partial invoice payment –
http://venturebeat.com/2015/07/22/paypal-tweaks-its-invoicing-service-so-you-can-make-partial-payments/
I give my clients the option to pay either via credit card or PayPal and there’s not pressure to pay using PayPal. But as it so happens, each month a handful of customers will pay using PayPal on their own free will, which ends up saving me lots of money and paying for Freshbooks. 🙂
I used Xero, anyone found a way to do this in Xero?
I haven’t used Xero!
Thanks, I will do this. I’ve been using Freshbooks for a year and didn’t realize this option was for that. (I thought you had to pay extra to do that). Thank you!
One of the coolest user interface I experienced and their invoicing formats are very flexible, try
https://topnotepad.com/
It’s
not just invoicing with them, they have all of it packed in one: manage
clients, manage vendors, expenses tracking, estimates, accounting, CRM,
reporting ….
Thanks for commenting, Lipika! 🙂
If you’re invoicing from international clients, try TransferWise. They recently built a feature called request money that works similar to PayPal. Your clients would have to create a TransferWise account though but you’ll save a ton on the exchange rate because they use the mid-market rate.
Great tip, Susan! Thanks for sharing 🙂
I use Quickbooks, which also has fees (monthly and per transaction), but I couldn’t live without all the organization and reporting.
I hear amazing things about Quickbooks and I’m so glad it helps keep you sane! Thanks for sharing, Jessica 🙂
If you’re in Canada, I just started using FinalFile. They store your files for you and send your clients a link to pay/download. Clients pay using credit card, interac or paypal. 5% flat fee, no monthly costs (which is great because sometimes I get swamped for a few months and then spend the next month looking for more work). I’ve tried Quickbooks, Freshbooks, PayPal and even Square to try and get paid, but none of them give you any leverage. Clients still take their sweet time to pay. If you do your own invoicing, like I do, spending money on accounting software just to accept payments isn’t really worth the monthly fee on top of the transactional fees.
Awesome tip! Thanks so much for sharing with us, Arthur! 🙂
That’s funny, i have read that using invoicing software gets paid quicker than any other way. Plus, why would you pay exorbitant fee on your invoices when monthly makes more sense? For example if you got 5 jobs of 1,500 in one month @ 2.2% that’s $165! You pay less than that to use something like Freshbooks and as Melyssa says you could lose $1,000 in one year easily. At first i thought free was best now i see the other side of it. Doing our homework says big bucks.
I have Freshbooks! I’m going to try this with my next Paypal invoice… Thanks for the tip!
No problem, Patricia! Best of luck to you and please keep me posted on your progress. 🙂
Sadly, it won’t work with my client from Canada. 🙁 So I’ll still have to go through PayPal directly. But good to know in the future!
Hey Mel, quick question.
If I want to avoid the fees from PayPal how should I ask my client to pay me? would they be getting charged for paying this way?
You could ask them to send you money as a friend to avoid the fee but for a couple of different reasons you wouldn’t want to do this. A) It’s not very professional and B) the client doesn’t get any security for their payment.
I hope that helps and best of luck!
I suppose you could always put a disclaimer at the bottom of invoices stating that it you decided to pay other than PayPal the surcharge is put onto their bill? I have seen other companies do that.
Just wanted to comment and add that Freshbooks have redesigned their app so if you were using it prior to the launch of their new one, and you’re still not migrated to the new app, it’s because you have PayPal activated as a form getting paid.
Great tip! Thanks for sharing it with us, Timur! 😀
This may sound totally stupid but I get caught up in all the little avenues of having a new small business—my customer lives in my area and plans on paying cash but likes to keep her books straight so she requests an invoice for the product and then I’ll see her on Friday when she comes to pick it up and then will pay me in cash — will I have to pay a fee for the invoice I sent? And I guess it remains an “open invoice” since I didn’t process a credit card or anything—so will that mess me up.? Uggggh! Sorry for the inexperience but could use some input! Thanks in advance
Hi Jasmine, I am pretty sure if you send an invoice it’s complimentary 🙂 You could also create a basic template for one in a Word doc and save it as a PDF and send it out that way since you already know you will be getting cash from your customer 🙂
I appreciate you replying! Thanks! I’m trying it now!
So does that mean PayPal charges you the 2.95 + 30 cents once for sending out the invoice for you and again for taking the payment via a credit card?
Hi Vicki, I believe they only take the fee out one time, when the person pays you 🙂
Thanks so much for putting this article up Melyssa! I have been looking everywhere to find out if these fees are charged by most invoice software and wasn’t sure how it worked. Wave is a free accounting software and i thought that was a great app until i realised the fees involved. I don’t think i have seen any other app that doesn’t charge fees. Do they all charge similar fees? I think some don’t even tell you.
Hi there 🙂 Yes, I believe most do charge fees, as there is always a credit card processing fee involved with a lot of these payment software programs. I recommend building it into your fee (without mentioning it). So instead of charging $100 for something, maybe you charge $110, to account for the fees and extra expense 🙂
Well, Freshbooks is changing their pricing now. No more 3 free clients. Only 1. And I think new accounts no longer get the old PP flat fee. If you switch to their new UI–which they want you to do–you lose the flat fee capability. They are trying to get away from it. New changes about to hit. Looking for a different but similar solution now. Yuk.
Thank you for letting me know about the changes. I’ll update this post! 🙂
any updates on this? is there really no more flat rate on freshbooks?
good info. i paid my school fee already.
another invoice software i normally use is https://invoicehome.com
free for less than $1k per month, they will required upgrade for $5/month if exceed the $1k/month