The freelancing industry is huge, and only continues to grow in the digital age. Millions of people engage in freelance work, and those numbers are increasing in light of the COVID-19 pandemic.
One of the most crucial things to consider when starting a freelancing business is how to accept payments from clients. A variety of payment methods ensures that you get the compensation you deserve from your work without any headaches, while also giving your clients easy ways to pay – and come back for more.
So, here are five different payment options available for freelancers:
1. In-Person Cash Payments
This method has been tried and tested for centuries. It’s the ideal payment option if you’re doing business with people from your neighborhood, family members, or anyone in close proximity to you. Its biggest upside is its simplicity and reliability – meet, pay, and issue a receipt.
But as simple as this method is, it comes with its limitations. For one, your client base is only as big as the area accessible to you. Additionally, in-person transactions can be inconvenient for clients. Also note that, given the pandemic, in-person transactions aren’t advised.
Checks are ideal because, unlike when paying online, there are no fees when making the deposit. Checks can also be mailed, so there’s no need to meet in person.
Meanwhile, the downsides include the delays you get when waiting for checks to arrive in the mail and the possibility that they might be lost, damaged, or stolen on the way. The worst-case scenario is when checks actually bounce. The Balance explains that checks bounce when the person writing the check has an insufficient balance. So paying by check requires a lot of trust on the freelancer’s end.
3. Debit & Credit Cards
Moving on to more modern methods, we have plastic payments. This is one of the most common ways people opt to make payments, as it’s a quick and easy option. But note that debit and credit don’t work the same way. Petal’s guide to debit and credit cards highlights how the former entails money deducted from the amount users already have in their accounts, while the latter allows users to pay using borrowed funds they can pay later. What exactly does this difference mean for freelancers? The answer: Extra fees.
The glaring downside with plastic payments is the extra fee that merchants – in this case, freelancers – must shoulder. Standard interchange fees apply and often comprise the costs of payment processing and offset fraud. The flat fee and added percentage depend on the type of card, but credit card payments will generally have steeper fees than debit cards.
4. Electronic Funds Transfer (EFT)
Electronic Fund Transfers (EFTs) are another convenient option as they can be done remotely. They’re also one of the more hassle-free options because payments go straight to your account, with no need for a third-party application. But the only drawback is the banking fee required to process the transfer request. Depending on the banks involved, this could be a costly transaction. Additionally, transfers usually take a few business days to process, especially if your client is from another country.
5. Online Payment Options
Finally, there are online payment options outside of banking services. This option is common in freelancing, as it’s free and offers easy ways to open an account. Plus, it’s convenient. Both the payment and subsequent transfer to the freelancer’s account can be done remotely. There’s also an added level of transparency as you can view the transaction details on your smartphone.
However, the downside is that third-party applications impose service fees, and these vary depending on what application you use.
- PayPal is the pioneer of digital payments. When used for transactions, you pay $0.30 plus 2.9% of the amount you receive. Transfers are instant, unless sent from a bank account.
- Payoneer offers no extra conversion rates, but only if you’re in the list of countries they usually operate in. Plus, there are extra charges when the client doesn’t pay via the Payoneer platform.
- TransferWise provides quick transfers that can be made from multiple platforms, but charges 1% of the total bill to your client. It automatically transmits payments in your currency.
And those are five payment methods you can choose from when offering your freelance services. Here are a few tips to keep in mind when choosing:
Consider Your Financial Position
Think about your financial position, location, and each option’s features. Bank transfers are not ideal if you rely primarily on immediate payments. And if many of your clients are overseas, you might want to choose the platform with the most favorable exchange fees.
Always ask your client if you can send an invoice early because some companies operate on net payment terms. This specifies the length of time that your client has to pay once you’ve submitted the invoice. In Matt’s post, “How to Navigate Net Payment Terms on Your Freelance Projects”, he discusses the most common net payment terms, but generally, the bigger the client, the longer the timeframe. So send those invoices as early as you can!
Make It Easy for the Client
Offer more than one payment option to your freelance clients so they choose the option that’s best for them. The simpler it is for them, the better. This will make your freelance business more efficient and prevents delays when it comes to getting paid for your work.