When people compare invoicing tools, they usually look at the monthly subscription. But for a lot of businesses, the subscription is the small number. The big number is the payment processing fee, the slice taken out of every invoice your client pays by card.
A tool can be cheap to subscribe to and still be expensive to actually get paid through. Here is how the fees really stack up, and how to keep more of what you earn.
Two cost models
Invoicing tools charge in one of two ways:
- Flat subscription, bring your own gateway. You pay a fixed monthly price for the software and connect your own payment processor (Stripe, PayPal, a local gateway, or your bank). Your processing rate is whatever you negotiate with that provider, and it is separate from the software.
- Free or cheap subscription, built-in payments. The software is free or low cost, and the company makes its money by taking a percentage of every payment. This feels cheap until the payments start flowing.
The second model is where the hidden cost lives.
What the payment-first tools charge
- Square Invoices takes about 3.3% plus 30 cents on a card-paid invoice on its free plan. See Billbooks vs Square Invoices.
- PayPal Invoicing takes about 3.49% plus 49 cents on a typical payment. See Billbooks vs PayPal Invoicing.
- Wave charges about 2.9% plus 60 cents per card transaction, with payments limited to the US and Canada. See Billbooks vs Wave.
- Invoice2go bakes in card fees of roughly 2.9% to 3.5% depending on plan. See Billbooks vs Invoice2go.
These are all reasonable products. The point is simply that the fee, not the subscription, is the number that scales with your revenue.
The math that matters
Take a business invoicing $8,000 a month, paid by card.
- At roughly 3% plus a fixed fee per payment, the processing cost is about $240 or more every month, whether the software subscription was free or not.
- On a flat-price tool where you connect your own gateway, the software is a fixed cost (for example $7.95 a month), and your processing rate is whatever your chosen provider charges, which is often lower and always in your control.
Over a year, the difference between a fee you control and a fee baked into the platform can be thousands of dollars.
How to keep fees low
- Separate the software from the payments. A flat-price invoicing tool that lets you bring your own gateway means you are never locked into one processor’s rate.
- Offer bank transfer or ACH where you can. Bank payments are far cheaper than cards, often a flat fee or a small percentage capped at a few dollars.
- Negotiate your processor rate as your volume grows, something you cannot do when the rate is fixed by the invoicing platform.
Billbooks follows the first model: a flat $7.95 a month with unlimited invoices, and you connect your own payment gateway, so your processing stays yours to manage and reduce. You get the full invoicing workflow without a percentage coming out of every payment.
