The difficulty of working as a freelancer is that you have to take on roles that in a traditional job would be performed by others, usually experts in their field. These roles range from marketing to accounting and, although you can eventually outsource some of these tasks, it’ll be all up to you in the beginning.
Invoicing and collecting payment is often one area freelancers find the most difficult to manage, partly because there are many options available, each with its pros and cons. Services such as Indy Invoices can help you with these matters, but first, you need to understand the basics, starting with four of the most common payment methods available.
PayPal has been around for nearly 20 years and is a secure form of digital payment popular among many freelancers. Digital payments allow freelancers to be paid quickly wherever their client is. PayPal is used around the world, which adds to its trustworthiness.
PayPal allows you to invoice customers directly, and they send the money to your PayPal account; you then transfer that money to a connected bank account. One benefit of PayPal is the speed that money can be sent or received.
If both the client and the freelancer have PayPal accounts, you receive your funds instantly. However, if your client pays you from their bank account to your PayPal, it can take around 3 working days to process.
PayPal’s greatest downside is its fees. Freelancers can expect to pay a transaction fee of 2.9% of the total plus $0.3o, so if you receive a payment of $1,000, you will pay $29.30 in fees. On the plus side, PayPal is available in over 200 countries which is great for international business.
Zelle lets you transfer money instantly from your bank account to another person’s bank account using their app and the payee’s mobile number or email address. Because Zelle is backed by banks such as Bank of America and Capital One and embedded into their apps, it is incredibly secure. This also means that you don’t need a separate Zelle app to make or receive payments; it can be done through your banking app.
Zelle’s biggest selling point is that it is fee-free, so you can send and receive money without incurring additional charges. However, Zelle usually comes with a limit on how much money you can send. These limits vary if your bank offers Zelle, but if your bank doesn’t offer Zelle, your spending limit is $500.
Stripe is an online payment processing platform that works in a way similar to PayPal. Stripe’s general fees are the same as PayPal’s (2.9% transaction charge plus $0.3o), but Stripe doesn’t charge for extras such as fraud protection, refunds, recurring billing, and American Express acceptance.
Stripe has lots of customizable development tools that make it popular among tech-savvy freelancers. This can put off some users who are less comfortable with technology. However, Stripe is a secure, fast payment platform that works well for freelancers and small businesses.
TransferWise is another peer-to-peer payment service that is extremely secure but also very user-friendly. TransferWise is popular for freelancers who need to send or receive money internationally because of their reasonable fees.
TransferWise’s fees vary depending on the amount of money, how you pay, and the exchange rate. This might sound complicated, but TransferWise offers a handy calculator so you can see how much you will be charged to send money. For instance, to send $1,000 to the UK, you will be charged a $6.25 standard fee plus 0.43% variable fee, for a total of $10.55.
TransferWise is also popular for international payments because it uses live exchange rates rather than a fixed rate. However, when sending large amounts of money, their fees can become prohibitive.
5. Paper Checks
Checks have been around as a form of payment for hundreds of years. The great thing about checks is that there are no fees involved. On the downside, checks can take a long time to clear, and there’s always the possibility that they may bounce.
Accepting checks is a good idea if you have customers who are uncomfortable with online payment methods. Still not sure? Seek advice from freelancer peers through a networking service such as Indy.
6. Direct Deposit
Direct deposits are usually made through electronic funds transfers (EFT) online or via a banking app. They often take 2-5 business days to process, but there’s no need to transfer the money to a secondary institution after processing.
However, depending on the banks involved, you or your client could incur a fee, which is often a percentage of the total amount transferred.
Choose the Right Payment Option
There are pros and cons to all payment methods, whether it’s fees, daily limits, or processing times. It’s a good idea to offer your clients more than one option, if possible, but make sure these methods suit you. It may involve making some changes to make them work for you, such as increasing your fees to reflect your services or products’ cost and the convenience of accessing multiple payment platforms.