You’ve got the talent, the intelligence and the determination to make it as a freelance blogger.
But when you sell your work to clients, there’s something you might want to think about:
Are you wasting some of your hard-earned money every time your client pays your fees?
Most payment methods involve a cost, especially for online payments. If your client’s sending your money from another country, there might be an extra fee for currency conversions, too.
Some clients are darlings who want you to receive the full invoice amount, and will pay the transaction costs themselves where that’s possible. If you find one of those clients, treat them well — they’re a keeper! But most of your clients won’t spare a thought for how much you pay to receive their money. It’s none of their business.
Because it’s your business.
As a freelancer, it’s up to you to know what payment methods work well for you, and to avoid the ones that don’t. To help you do that with minimal effort, here’s a guide to the most important things you need to know about receiving online payments from your clients.
Why am I only talking about online payments? Because you’ll need at least one online payment option if you want to do business in the international, internet-based blogosphere.
I’ve received US dollar cheques in the mail from clients, only to lose 40% of the payment to fees for cashing a foreign cheque. I’ve had clients who wanted to pay me by international wire transfer, until I explained I’d have to add the ridiculously high fees to their invoice amount.
It’s not only foreign clients, either. Even people who live only an hour’s drive away from me have used PayPal to send me money. A lot of the time, online payments are the simplest option for everyone involved — but they might not be the cheapest.
Who Pays What?
If you invoice a client for $400, then pay a 5% transaction fee on the payment, you just lost $20 to fees.
Let’s put this into a longer-term perspective: if you make $80,000 per year and pay a 5% fee on every transaction, you’ll lose $4,000 to fees each year. If you can avoid paying the fees, you’ll save enough money to make a big difference to your freelance blogging business!
The easy way to do this is to add a little extra to your invoice to account for the fees. If you charge $420 instead of $400 and pay the same 5% fee, you’ll wind up with $399 and your client will have paid the transaction costs for you. [No need to explain why you added the extra $20. Most clients don’t care as long as they get the results they want without going over budget, so just tell them your total fee.]
If you work with clients in other countries, this next part is even more important to your business:
Paying for Currency Exchange
When you convert foreign currency into your local currency, there’s almost always a cost involved. And it’s easy to get tangled up by all the numbers you read on an online payments site, so here’s the fast track to sanity:
- Whether you’re changing US dollars into Australian dollars, British pounds into Euro, or Canadian dollars into Philippine pesos doesn’t matter.
- Whether you’re charged a commission percentage or a flat fee or a combination of the two doesn’t matter.
- What matters is the total cost of the currency conversion relative to the amount you converted.
If you like maths, here’s how to do it. [If you don’t like maths, just pretend the bulleted list ends with “because mathematics” and skip straight to the “What’s the Best Service?” section.]
total conversion cost ÷ amount converted × 100 = cost as % of payment
For example, imagine you’re US-based and your client sends you $400 of Canadian money. There’s a 5% transaction fee to receive the money, and 5% of $400 is $20, so that leaves you with $380 Canadian.
Then you want to convert that into US dollars, and your online payments service charges you a 3% commission plus a $5 (US dollars) flat fee for converting currencies.
That 3% commission works out to $11.40 in Canadian dollars. The $5 US dollar fee is a little trickier to handle because until now we’ve been working in Canadian dollars, but to get a reasonably close estimate you can multiply the 5 US dollars by the current exchange rate into Canadian dollars. Today, $5 US is roughly $6.50 Canadian.
Use the equation above to make sense of it all:
total conversion cost ÷ amount converted × 100 = cost as % of payment
($11.40 + $6.50) ÷ $380 × 100 = 4.7
So in this example, the total conversion cost is 4.7% of the amount you converted. Whether that’s a good thing or a bad thing depends on what alternative options you have available to you!
If you expect to receive a lot of foreign currency payments, check out the total conversion cost of each available payment method. Use a round number like $100 as your imaginary payment amount to make your calculations easier, and weigh up the conversion cost against the general transaction cost (the fees you pay even if there’s no currency conversion).
What’s the Best Service?
The best online payment method for you depends on where you live, how much money you expect to receive, and what you want your payment service to do for you. There are a lot of options, so I’m just going to tell you about 3 for now.
Merchant Accounts: Ideal but expensive
A merchant account is a good solution if your income via online payments is high. But if you don’t make a lot of money per year yet, or if only a small amount of it comes in via online payment services, then the fees on most merchant accounts are simply too high to make it worth your while.
I’ve seen merchant accounts charging an account opening fee plus a monthly subscription plus a percentage commission and a flat fee for every transaction. One merchant account provider in the UK quoted me a £99 setup fee and a £10 per month subscription, plus fees on every transaction, just to be able to receive payments from UK clients — receiving and converting foreign currency payments would’ve required a whole extra package (with a whole extra fee).
That’s too much money to spend if you’re only using your online payment method to receive occasional payments, but could be worth considering at some point in the future if you make freelance blogging your full-time living.
PayPal: Common but far from perfect
I receive a lot of PayPal payments each month in a whole range of currencies.
Then, because I’m in the UK and want my money in Great British Pounds, I’ll have to suffer PayPal’s foreign currency exchange rates. See, PayPal exchange rates are shockingly different to the ones you’d see on a specialist currency exchange site, or the rates that banks give each other when they convert currencies. [Hat tip to Peter Sandeen for pointing out this secret PayPal thievery.]
I’m usually pretty good with tech stuff, but there’ve been times when setting up PayPal buttons for my services frustrated the hell out of me, or when my carefully-prepared buttons started acting weird the moment I pasted the HTML code into my website. And I never liked the way PayPal makes my clients go from my site to PayPal’s own website to complete their payment — it makes one simple step into a journey across the internet!
The biggest issue I have with PayPal, though, is the array of different fees they charge for different things. There are so many little rules, and tables of fees that “start from 3.4%” without telling you where they’ll finish, I sometimes have to sit down and figure it all out with a calculator before I know what fees to expect.
Despite all that, I still accept PayPal payments from a lot of my clients. Why? Because so many people use it, I’d be silly not to have an account.
Selz: Super-easy but only takes Visa & Mastercard
I got introduced to Selz by Gary Korisko of Reboot Authentic [thanks, Gary!]. This new-ish online payment service launched earlier this year and has straightforward transaction fees of 5% plus $0.25 on any payment you receive. That’s it. No “starts from”, no monthly subscription, no tables of numbers that make your eyes go crazy.
**Full disclosure: When I decided to write a post about Selz, the people at Selz asked if they could pay me for the work I put into writing it. I told them they’re welcome to send me money provided they understand that (1) I’ll tell everyone about the offer of payment and (2) I’ll write exactly the same post whether they pay me or not.**
The nice thing about Selz is its fast, easy payment button setup process, with no fiddly techy stuff. Like PayPal buttons, you can do it by copying and pasting some HTML code into your website. But if that sounds too high-tech, use their WordPress plugin instead to create a button or widget anywhere in your site’s pages and posts in just a few seconds.
Seriously, just a few seconds. For the tech-terrified, that’s a big help. Watch how fast it is in this video:
I’ve used the Selz plugin, and it took me about 2 minutes from start to finish — that includes creating a Selz account, linking it to my PayPal, installing the Selz plugin on my WordPress site, and using it to create a fancy widget with a sales button.
A nice set of package deals like “1 Standard Post Per Week”, “1 Deluxe Post Per Week”, “3 Standard Posts Per Week”, and so on, each with its own Buy button, can be an easy way to make a sale right off your freelance business website from time to time instead of always negotiating via email. Just be sure to define exactly what’s included in each package!
Two more things I like about Selz:
- People can make a payment without ever leaving your site. Watch the video above to see the Selz overlay in action. Much nicer-looking than an abrupt trip to Paypal’s login page.
- Selz will store and deliver digital products like PDFs for you and stamp them with the name of the buyer. So you can set up a professional-looking PDF voucher for a free 15-minute blog consultation and it’ll be delivered to anyone who clicks the “Buy Now: FREE” button on your site. Then all they have to do is email you their voucher to book a consultation appointment — and you get 15 minutes to explain why this prospect should hire you as a freelance blogger. 😉
The only major drawback I’ve found with Selz is that they’ll pay your money into your PayPal account, but they don’t accept payments via PayPal. [Update: they do now! But you have to pay a small extra fee to accept PayPal via Selz.] Check out the Selz blog for more news about what payment types they work with. I’m still testing out the Selz system, and I’ll report back after I’ve tried it for another couple of months.
There are a lot of other potential alternatives for receiving online payments. None of them are perfect, none of them work for everybody, and the best thing you can do is try a few out before you make your final decision.
It’s your business. It’s your money.
Take a moment to realise just how fucking splendid that is. 🙂
Now go and earn some more!
Image: M4D Group