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Today I am typing up financial transactions for my business into my spreadsheet (get your free spreadsheet).
I am celebrating that last December I made my best ever month in my business (champagne, please)!
I am shocked how much money I paid in bank and payment provider fees. I knew they were there, I didn’t expect how much they added up.
I want to share with you how these sneak in, so you can be aware, remove any fees you can avoid and make a good decision about fees you do pay for yourself.
First things first, a Big Thank You to UK banks who have ultra low fees compared to most countries (if you’re looking for a business bank account, read my post on choosing one).
I’m not saying financial charges shouldn’t happen. Charges and fees are part of money and doing business.
On the other hand, all those charges and fees add up.
They can add up to a much larger wodge of your profit than you realise and if you don’t know, you can’t make a good decision about that.
So statements and spreadsheets at the ready, cake at hand, let’s get stuck in.
I am charged a fee from Intuit Pay every time I receive a payment over the phone from a new client. I enter the full amount in income and add the fee to my expenses (it’s tax-deductible). It’s a part of doing business and I am happy to pay a percentage to have payment right then as my client has the reassurance of knowing they have help and support and my bank account loves the cash flow.
Sometimes I use Stripe integration with my invoices (I use Wave accounting. Read my Ultimate Guide to Accounting Software) which allows my client to pay my invoice by credit card. I am charged a fee for that which I am happy to pay occasionally.
When you buy a copy of my Tax Return Toolkit, Paypal charges me a fee. Again, part of doing business, but do you know the percentage and that you can negotiate it once you have a track record? Do you know your sales income after payment fees have been deducted?
Card readers like Paypal Here and iZettle also charge a fee per transaction. Keep track of them. There is a reason a lot of independent offline businesses, like your local cafe, only take cash, or card over a minimum amount. Those percentages add up.
These are charged when your incoming payment is in a different currency to your bank account. They are part of banks and credit card providers being transparent so every time you receive (or spend) money in a different currency, you’ll have your original transaction, plus a non sterling transaction fee.
Receiving international bank transfers or different currency payments may happen occasionally. Look at alternatives if you are likely to receive larger amounts or more frequently or read this post about payments by digital nomads Making It Anywhere.
You may choose to receive client or sales payments by credit card when there are also free/lower cost options, e.g. having a Paypal Buy Now button for your services, instead of only taking payment by bank transfer.
If you have international clients, their internal systems may require you to receive payment by international bank transfer (IBAN system or similar). You’re likely to be charged by your bank for receiving the money, maybe twice if it’s also in a foreign currency.
Sometimes you can negotiate a better (read, cheaper) way, sometimes the best way is to buy a bottle of prosecco every time you are paid to remind yourself it’s still money coming in, whatever the bank charge is.
Paypal are the only payment provider I know of that give the option of the sender or receiver paying credit card fees. This can be handy if you want to pay your supplier (copywriter, coach, virtual assistant) on time and you have cash flow issues. It’s icky for them to pay the credit card fees when credit card payment isn’t in your contract with them.
I wouldn’t recommend it as more than an emergency option, but it’s nice to get the warm and fuzzies by paying your supplier on time – with a credit card choosing to pay the credit card fees yourself. We’ve all been in the chain of ‘not being paid because we’re waiting for someone else to get paid’ and it’s not fun.
You have an international supplier or need to refund an international client? Banks charge international fees, Paypal can be the least expensive option or try one of the new lower cost money transfer services, like Transfer Wise.
Some companies charge you to use a credit card. This is because the credit card companies charge them, and they know it adds up! To motivate you to use a payment method that costs them less, they charge for credit cards. Be aware when buying if there is a charge and make a conscious decision if you choose the credit card option.
Bring on the cake.
Fully a quarter of ALL my accounting entries are non sterling transaction fees. I buy a lot of digital apps and services (Buffer, Hellobar, Social Oomph, Adobe, Boomerang, Crash Plan, Google Drive…..) and almost every single one charges in US dollars and so for almost every single one I have a separate non sterling transaction fee.
Low priced example – Boomerang for Gmail is US$ 4.99 and cost me a non sterling transaction fee of 8p.
Higher priced example – Lucky Bitch Money Bootcamp is US$ 797 and cost me a non sterling transaction fee of £15.28.
Each bank and credit card provider lists them slightly differently, and some don’t even separate it out fully so I need to calculate the price of what I bought in sterling because they don’t tell me.
Pass the wine.
I estimate the charges are around 3%. The amount in time? HOURS. (See 4. Opaque charges)
Pass more wine please. Red. In fact, it’s non sterling transaction fees and YET ANOTHER ONE, MY EYES! that made me stop what I was doing on a Sunday night to write this post.
Maybe if we all write to the more friendly of the apps, they may charge in sterling. (I asked Buffer already, no luck yet).
And buy annual if you can.
This is a little something I found out from my time on the EU VAT campaign (I’m a co-founder of EU VAT Action). It seems some payment providers may use a more favourable to them exchange rate than the standard agreed rate – which means less money in your pocket.
See Non Sterling Transaction Fees.
Also see Focus Lost Due To Yelling At The Screen As I Add Yet Another £0.08 Non Sterling Transaction Fee.
(All together now Lucky Bitch devotees, ‘Even though I am angry at my time and focus lost by many non sterling transaction fee entries, I deeply and completely love and accept myself)
Yes, that’s right. A lot of these fees are unavoidable. However that isn’t the point. You need to be conscious of what you are paying, to who, and why.
Ignorance is no excuse here.
Mostly you can know what you need to know by looking at your statements and provider accounts. The information you need is all there in black and white and pixels.
If it feels icky, that’s ok, no judgment. We’ve all got our issues, there’s no shame. Do it anyway.
Accept some help if you need it.
You can contact me here if you’re ready for the next step.