All this week I have been preparing my accounts for period April 2010 through to April 2011, and it has been a tiring experience. But as well as tiring it has also proved a valuable lesson in terms of how I have spent my money, but more crucially, where I can make provisions to save money.
I have talked before about how Paypal, whilst offering convenience for paying clients, cripples your bank account for receiving these client payments.
In the last year I made the decision to remove Paypal as a means for clients to send me payments. Convenience is one thing, but it's certainly not convenient to see your hard earnt payment minus a "convenience" fee.
I guess it all depends on the level of invoicing you are putting through Paypal as to whether it's worth sticking with and putting up with these "convenience" fees. If offering a convenient payment option for your client trumps your own personal financial well-being then that is your decision to make.
I wanted to just highlight the savings I could have made in that working period of April 2010 through to April 2011. This was a period where most of my client invoices were settled through Paypal rather than bank transfer, and include some projects varying from £800 through to £3000.
I also want to add that I encourage my clients to pay in whole at the beginning of the project: As an incentive I offer a 4% discount on all invoices paid in full. Remember that if you are invoicing a logo design project in stages then you are going to incur multiple costs, so there is a good reason to settle the bill in one go.
Obviously a client needs to trust that you will deliver as it is quite a leap of faith, but this will ultimately come down to how you present, market and sell yourself. I have literally just had one client pay £4000, the whole invoice, before starting the project. They had no problems arranging the bank wire as well as funding the bank wire fee. I like to think I am offering a pretty valuable service that is worth paying good money for. That's not arrogance, that is simple having respect for your own skill and placing a positive value on what you can offer other people.
People will pay whatever needs to be paid if you have something special and valuable that they need or want. If you want that new 2nd hand car from a private seller then you will foot the bank transfer fee, you wouldn't expect the seller to foot that cost. You pay it because it's your money, and you have initiated the transaction and therefore accept any conditions that come with that transaction. If you don't like it you can move on.
I know buying a car is a totally different to designing a logo, but I am offering a service that people need or want. I am a skilled service provider, of sorts, in it to make a living, and not provide convenient methods of payment that reduce my profit. Don't be lazy and just blindly use the easiest and quicket payment method like Paypal. It's not hard to arrange a wire, and it's usually complete in a day or so. People expect instant everything which ultimately costs in the long run. Have a little patience and look to do something that works for you, rather than everyone else at your expense.
You are desinging something very special, that is the one thing you are doing for the client. It's not being selfish, it' being responsible and practising business savvy. Business is Business after all. Being firm, and clear, from the outset about how you work and operate also sends a message that you respect and value your work, and that just because you don't offer a "convenient" payment method this doesn't make you any less professional. Your clients will likely be shrewd business operators as well, so grow a pair and stand up for your self as well as stop being a "yes" person.
You can still offer payment incentives that will entice the client that doesn't mean a 3rd party takes a cut off your profit as well as earning interest on your profit whilst taking a "convenience" fee in the process.
I am also not saying this is how it should be for everyone as clearly it can't work for all situations. But what I hope is that what I say here may at least get you to think and consider other options that benefit your profit rather than saving 5secs here or there.
Paypal Fees Are An Expense
I could have added up these fees a long time ago, but I chose to just put-my-head-in-the-sand and assume I had to just lump it. And to be honest I would not have even thought about doing it at all had my accountant not mentioned that Paypal fees can be grouped as "expenses" which can be deducted from your gross income, and thus saving your overall tax costs for that year.
During April 2010 through to April 2011 I had £662.15 removed from my client invoices for the sake of providing a "convenient" payment option. £662.15 is a heck of a lot of money to have just taken away for providing a "convenient" payment option to your clients. That is totally not acceptable to me and this is why I no longer offer Paypal as a means for clients to settle their invoices.
Imagine what £662.50 could help you with: a mortgage or rental payment, weeks of grocery shopping, months of dog food and treats, topping up my pension plan, months of utility bills, car insurance, that new iPhone, upgrades to your computer set-up etc.
All I suggest is that if you rely on Paypal just because it's convenient to your clients, and you are invoicing reasonable sums of money, it surely begs the question: Are these Paypal fees worth a little bit of convenience?
Admittedly bank transfers, especially overseas ones, often prove to be a little less than straightforward but we always get there in the end. It's easy to assume that convenience should trump everything else, but surely not common sense in regards to your financial well-being? I believe that the onus of a invoice payment fee should be the responsibility of the client to foot, and not the designer. The client has sought me out to provide a skilled service, and in doing so is taking the responsibility in ensuring that they can afford and meet any "reasonable" costs therefore incurred, especially when it comes to payment.
I realise that if you have a large volume of payments then my outlook is certainly not proper convenient, but if you are only taking a few main transactions a month then it becomes a lot more appealing to consider removing Paypal as an option. I also don't care much for speedy payment as long as I am paid, but I do care that I don't haemorrhage money for a little bit of "convenience."
I use Paypal most days to pay for retail type things myself. But if I am paying for a service, and that person requests something other than Paypal then who am I to point-a-finger? That is there choice, and it's my choice to hire their services and my responsibiliyt to make the payment happen. If there is a transfer fee then I pay that, I personally would not expect them to foot the cost for me to send them the money.
This is totally different to retail scenarios, and credit card charges, so I am getting a little tired with that old argument.
Note RE Adding Convenience Fee
I know a good few people bolt-on a Paypal "convenience fee" of between 3-4% to the client in order to recoup the Paypal fee. This is something I did also. The problem is: adding any kind of additional fee and passing this onto a client who is choosing to use Paypal to send you money goes against their TOC's.
I had a now-no-longer-client who reported my attempt to "extort" this "convenience fee" to Paypal, and let's just say it's not something you want to fight Paypal over. If you do continue to pass on a "convenience fee" to your client then just make sure it is not refered to in any way. In other words just incorporate it into you final invoice.
But this is just getting messy for me, so I would much rather avoid Paypal altogether for the moment. I am being hired for certain skills: not to provide a discount and convenient payment option that repays me with no "convenience", and no "discount".
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