The complete guide to getting paid

August 20, 2019
5 minutes read

One of the hardest parts of running a client service business or freelancing is getting paid. Figuring out what to charge, how to accept payments, chasing late payments, and handling issues can be really challenging. These things take up your time and energy (and they’re not billable), and when things go wrong it can negatively affect your cash flow and the future of your business.

This guide is here to help you with every aspect of getting paid for your hard work: from setting your rates with confidence, to setting up processes that help you get paid faster, to preventing late payments to handling clients who won’t pay, to like a pro.

Chapter 1: Setting rates and prices

Person watering a plant

More people are diving into the world of self-employment. One recent report from Upwork and Freelancers Union showed that freelancers are forecasted to become the majority of the U.S. workforce in the next 10 years. And millennials already have a head start—almost half of these workers are already freelancing.

As more nine-to-fivers take the leap into freelancing or running their own business as a consultant, one of the early obstacles they often face is putting a monetary value on their products or services.

If you’ve only ever been paid a flat salary, it can be daunting to translate that to freelance or consulting rates. And because you generally have more overhead as a self-employed worker than you would as a salaried employee, you have to factor in these expenses when setting your pay rates—otherwise, your bank balance could end up far lower than you anticipated.

So, how exactly do you figure out how to price your products or services? While rates will vary depending on your industry and experience, we’re here to empower you with a few common ways to calculate your rates so you can get paid fairly.

Differentiating between cost and value

The first step toward setting your rates and prices is understanding the difference between cost and value. These two concepts can help you understand how to set rates that not only pay your bills, but potentially turn a profit.

Here are the definitions, boiled down to their essence:

  • Cost: What you spend to produce your product or service.
  • Price: Your pay rate. This is the financial reward from a client or customer for providing your product or service.
  • Value: How much your product or service is worth to your client or customer.

For example, a freelance graphic designer creates a logo for a client. Stock images and vector images cost $50 and it takes 15-20 hours to create the logo, costing $75 an hour in labor. The total cost is $1,125-1,500, but the logo is far more valuable than that to the client. Because the client can use the logo on their website, social media channels, and all their marketing materials, the value is more than the cost. As a result, the designer may charge $2,500 for the logo.

How to calculate your freelance and service rates

When working as a freelancer, you have a couple of options to help you calculate your rate. While some of this will depend on your type of business, your niche, and the products or services you provide, you may decide to use an hourly rate or a project rate—or both.

Whether you’re a freelance designer, copywriter, marketer, or consultant, these are the two common ways to set a fair pay rate for yourself.

Calculate your hourly rate

If you’re used to working on salary, you may not have any idea what your services are worth per hour. Although calculating your ideal hourly rate will take a few different formulas, never fear—we’re here to walk you through the math.

Step 1: Start with your target income in mind

Start with the end goal in mind. How much money do you want to make in a year? Do you want to replace your current full-time salary? Or maybe you want to increase this year’s earnings compared to last year?

For example, let’s say you’re making the jump into full-time freelancing and you want to keep making your current salary of $80,000.

Step 2: Factor in the costs of doing business

Unfortunately, self-employment or running a small business comes with more costs. You’ll likely have far more overhead as a freelancer than you do as a salaried employee.

As such, you’ll have to tally up the expected costs of running your business and factor those into your desired income. While every business and industry has unique costs, some of the common ones you’ll need to consider are:

  • Office space or co-working space fees
  • Advertising and promotion costs for your business
  • Utilities for your office space (like Internet)
  • Equipment costs (like your laptop, printer, etc.)
  • Professional services from third parties (like a lawyer or accountant)
  • Web hosting services for your company website
  • Software and subscriptions needed to run your business (i.e. Adobe Creative Cloud, stock photo credits, invoicing software, project management software)
  • Self-employment taxes

Once you tally up all the expenses required to run your business, you’ll need to apply that to that desired income number you came up with in Step 1. Again, since you’ll be shelling out cash to cover these expenses yourself, you’ll need to add this tally into your target income.

For the sake of this example, let’s say you estimate that all your business expenses for a year added up to $15,000.

Plug your numbers into this formula to arrive at your adjusted annual income total:

Desired income + Estimated overhead business expenses = New target income


$80,000 + $15,000 = $95,000

So, to replace your full-time salary, you’ll need to make more as a freelancer to cover your overhead.

Step 3: Tally up your billable hours

Self-employment boasts many benefits and a flexible work schedule is at the top of the list. Being your own boss means you set your own work hours—and while that freedom is enviable, it can make calculating your average billable hours tricky.

You’ll need to estimate the number of hours you plan to work over the course of a year. To get to that point, let’s start with estimating the number of days you’ll work annually. We know there are 365 days in a year—but obviously, you won’t work every day. Subtracting weekends, that leaves around 240 working days.

But again, you won’t work every single weekday of the year. You’ll also need to include days off like:

  • State/provincial and national holidays (7 for the U.S., 9+ in Canada)
  • Sick days
  • Personal/mental health days
  • Vacation time

In our example, our new freelancer wants to observe all national holidays in the U.S. as well as bank five sick days, two personal days, and three weeks of vacation each year. That adds up to 29 days off in a year, which leaves you with 211 working days annually.

Next, calculate your working hours (also called billable hours):

8 hours (average number of hours worked in a day) X 211 (work days each year) = 1,688 hours

Realistically, all those hours won’t be billable to your clients. You’ll spend some of that time promoting and growing your business, networking, creating proposals for prospective clients, and completing other administrative tasks that aren’t billable.

As a buffer, let’s assume around 25% of your working hours will be spent on tasks that aren’t billable.

1,688 hours X .25 percentage of non-billable hours = 422 non-billable hours

1,688 – 422 = 1,266 billable hours per year

Step 4. Calculate your hourly rate

Stay with us—we’re in the home stretch. Now that you have your number of billable hours, you can finally calculate your ideal hourly rate.

Grab that adjusted target income you calculated back in Step 2 and plug it into the following formula:

Target income / Number of billable hours = Rate per hour

or, in our example:

$95,000 / 1,266 = $75.039 per hour

Because we all like nice, round numbers, we’ll say the ideal hourly rate for this imaginary freelancer is $75 per hour.

Set a per-project rate

Yes, calculating your hourly rate can be onerous (it’s a lot of math, we know). But that minimum hourly rate is a solid foundation for your pricing strategy. Once you’ve established an hourly rate for your freelance work, you can also create a separate set of rates for the kinds of projects you regularly do.

Setting a flat rate for various types of projects you regularly complete is advantageous for both you and your clients. Your customers know exactly what they’ll pay once you complete your project, and you don’t have to keep a hawk eye on how much time you’re spending on any given assignment.

To start setting your project rates, take a look at the average time it’s taken you to complete common past projects. For example, you may spend an average of two hours writing a press release and 10 hours to compile a short whitepaper. Once you have a list of the projects that clients most often request and their average completion time, you’ll have a solid foundation to begin calculating your per-project rates.

When you receive a brief from a client or are compiling a proposal for an upcoming project, examine all its components. Estimate how long each phase will take you, and make a note of the labor required. That can serve as a base for your project rate.

From there, ask yourself these questions, as they’re relevant and should be factored into the pricing for any project:

  • How common is your service? If you provide a very niche service or product that isn’t accessible elsewhere, you can factor that into your pricing. And if you’re a seasoned pro with years of experience providing this service, your time is more valuable—which means you can command a higher rate.
  • What are the parameters of the project? What are the specifics around the projects you’ll be completing? What is the timeline and complexity of the work required? For more complicated work with quicker turnarounds, you can set a higher rate or tack on a rush fee if your client requires the deliverables sooner than your typical timeline.
  • Is the client high maintenance? If you’ve worked with this customer before, you have a sense of what it’s like to work with them. Do they require a lot of meetings to discuss projects? Is it difficult to get the materials or supporting documents you need to complete your projects? If so, factor that into your project pricing for that client.
  • Does the project require a lot of administration work? Will you spend a lot of time going back-and-forth on revisions? Or maybe you’ll need to spend a few hours on a wireframe before you begin designing a website? Estimate any admin time the project will require and include it in your pricing.

One of the common formulas that includes many of these factors is:

(Rate Per Hour x Hours to Complete) x Complexity Level

Once you’ve answered these questions and scoped out the project, you can plug in the info to this formula and offer your client a flat-rate estimate.

This concept is also often called “value-based pricing” because the strategy takes the value of your service into account. Your product or service is creating value for your client—and you can set your prices accordingly.

Look at it this way: A web designer creates a website for a client that helps them sign up 10 new customers. Each of those customers is worth $5,000 in revenue. That means your website is worth $50,000 in revenue a year for your client. If the web designer charges $5,000 for that website, the client could view that as a killer deal from that value-based perspective.

How to price your products

On the other hand, some business owners sell physical products—in this case, you’ll need a separate pricing strategy.

There are many ways business owners can price products, but here we’ll round up a handful of the most common formulas to calculate a fair price for physical products.

Basic product pricing formula

Some retailers use this method to quickly set prices for their products. Essentially, you double the cost of the product for a 50% retail margin.

If you prefer formulas, just plug the product cost and margin percentage into the following:

[(Cost of item) / (100 – margin percentage)] X 100 = Product price

Let’s say you’re selling homemade soaps that cost you $2 per bar to make. You’d like to double that for a 50% margin.


[($2) / (100 – 50)] X 100

[($2) / (50)] X 100

.04 X 100 = $4 per bar of soap

Depending on the product and situation, you may want to build in a higher margin. To decide, consider factors like the product’s quality, customer demand, your target customers, etc.

Other product pricing tactics

Pricing physical products is more of an art than a science. There are many strategies that businesses employ depending on a variety of factors. Some of the other common strategies businesses use include:

  • Manufacturer suggested retail price (MSRP): When you buy products at cost from a manufacturer, some will suggest the retail sales price for that product. This is calculated based on the average sales price for a general consumer, and was originally adopted to help standardize product pricing for multiple locations.
  • Keystone pricing: The double-the-wholesale-cost method we used in the simple formula above. Just multiply the cost or wholesale price of your product by two for this method.
  • Bundle pricing: Some businesses discount products to encourage customers to buy multiple items (also known as a “bundle”). This works especially well for products that are normally purchased together. For example, your local grocery store may offer a bundle pricing promotion on peanut butter and jelly. Normally, peanut butter is $2 a jar on its own and jelly is $2 each as well. But the store is offering both for $3 when purchased together.
  • Anchor pricing: Convincing customers that they’re getting a deal is one time-tested method that boosts product sales. Anchor pricing essentially shows the current price next to the original suggested price. The current price is often substantially lower than the original price, which shows customers that the product is a steal. Walmart regularly uses this pricing strategy with their price “rollbacks.”
Image: Quora 
  • Psychological pricing: Some research has shown that prices ending in odd numbers (5, 7, 9) trigger a psychological response in customers. And experiments showed that prices ending in 9 has the best sales results. So, instead of listing a product price at $10, try selling it for $9.99 or $10.99.

These are just a few methods to help you set product prices that are fair for both you and your customers. You may decide to use a combination of tactics and some old-fashioned experimentation to see what works best for your unique circumstances.

Additional resources and tips

While the above formulas and tips can serve as guidelines to help you set rates for your products or services, you may still want affirmation that you’re not charging too much or too little.

We recommend you also check in with industry publications and associations—these organizations publish up-to-date guides on the average rates for specific jobs in your niche. From here, you can get a good idea of what you should be charging based on the average rates other freelancers and small business owners.

While there are innumerable industry associations and publications for every kind of business, here are a few resources to help you get started:

While doing your homework, we also recommend a few other resources and tactics that can help you set fair rates that don’t scare away clients and ensure you’re paid fairly:

  • Talk to experts: Veteran freelancers and small business owners have years of experience under the belt. They can offer valuable insights on what rates they offer based on their experience, location, and niche.
  • Check salary calculators/tools: There’s a wealth of tools out there that provide info on salaries for your industry, including GlassDoor and LinkedIn Salary.
  • Check with competitors: Use a tool like LinkedIn (or simply Google) to find competing freelancers or small businesses in your niche. Take a look at their pricing model—check their website for rates or request a quote via email—and see how that aligns with the rates you’ve calculated for yourself.
  • Experiment with rates: Trial and error can also help you find a pricing strategy that works for your business. For example, you can try hourly pricing with one client and a per-project rate with another. Once you’ve completed work for both, reflect on which model worked best for you and your clients. Many freelancers also increase their rates annually to keep up with inflation and to incrementally work toward their ideal pay rate.

Moving forward with setting your freelance rates

Setting your freelance rates and pricing your services for the first time can feel like an overwhelming task at first glance. Now that you have a few handy formulas and tips to guide you through the pricing process, it’ll be far easier to set your rates and justify your value to current and prospective clients.

Chapter 2: Invoicing clients

An invoice getting paid

As a freelancer or consultant, one of the more tedious tasks you’ll have to regularly complete is invoicing your clients.

Even though invoices can be time-consuming to create and send, they are integral to running a small business and keeping your cash flow in ship shape. Not only do invoices help you get paid appropriately and on time, but they can also help you keep accurate records of the products or services you provide.

Invoices are also still the top way freelancers and consultants get paid. A Billentis report estimated that there were 500 billion global invoices created in 2015—and that number is only expected to grow as more nine-to-fivers take the leap into self-employment.

But if you’ve never created an invoice before, this process could feel a bit overwhelming. Never fear—we’re here to walk you through the purpose of invoices, the benefits, what to include on your invoices, and common mistakes to avoid.

What is an invoice?

Invoices are essentially itemized lists of the products or services rendered to a particular client over a period of time. Generally, invoices will include a basic description of your product or service, the cost of each plus the total, and basic payment terms.

The benefits of invoices

Businesses of all sizes and across industries use invoices as a basic template to prompt payment from clients and/or vendors. An invoice is equivalent to sending a bill—your vendor or client should know at a glance what they owe you, what they’re paying for, and when payment is due.

In addition to acting as bills to prompt payments, invoices can also help your own bookkeeping efforts. Invoices make it simpler to track your monthly, quarterly, and annual income, as well as tally up taxes you’ve collected and owe the state/provincial and federal governments.

More businesses go paperless

Traditionally, invoices were printed and sent as paperwork to clients (often every month or quarter). However, the increase in availability of invoicing software has helped many freelancers and small businesses go paperless.

The Billentis report forecasted that 55 billion electronic invoices would be created in 2019, and it estimates that number will grow 10-20% annually. And the increase in electronic invoicing is understandable; the growing prevalence of cloud-based invoicing tools and apps has made the transition less expensive and accessible from anywhere with an internet connection.

How to create an invoice

Freelancers and consultants can use a variety of methods to generate invoices for clients. What you use will likely depend on your technical skills, available resources, and the unique needs of your business.

Some of the top tools you can use to create invoices include:

  • Invoicing software: If you’re looking for more bells and whistles than a simple, pre-made template, then I’d recommend leaning on cloud-based invoicing software. With software, you can add your own branding to invoices and automate tasks like recurring invoices and emailing out payment reminders to delinquent clients.
  • Pre-made template: Run a quick Google search for “invoice templates” and you’ll find a wealth of already existing templates that make it simple to create an invoice. The creators have done all the work for you—you just have to update these templates to include your relevant business info.
  • Word doc: It’s easy to upload an existing template into Microsoft Word and then customize based on your client, product/service quantities, and payment terms. And while there are a wealth of pre-made templates floating around the web, you’ll still need to fill in all your details manually—which is cumbersome and time-consuming.
  • Spreadsheet: Whether you prefer Excel or a handy Google Sheet, an old-fashioned spreadsheet can get the job done. While there are more efficient ways to create an invoice, if you’re in a pinch, a basic spreadsheet will do just fine. Spreadsheets make it simple to create charts to itemize the products or services you’ve rendered for clients, and formulas make it easy to add up all your individual items without having to manually do the math yourself. And while a spreadsheet will work in a pinch, working with spreadsheets can be frustrating and tedious because you’ll still have to manually fill in your details and can’t access any automation functionality.

What to include in your invoice

Everyone’s invoices look a bit different based on that person’s individual business needs, invoicing method, and industry. However, there are a few common items to include in every invoice you create.

Your business contact information

Part of an invoice - Header

First and foremost, you’ll need to let your client know who they owe money. Start by creating a header with the name of your business as well as all your contact information.

As in the example above, you’ll need to include your business address (or office address, depending on where you operate), phone number, and email address.

Client’s name and contact information

Part of an invoice - client information

Now, to help keep your own records straight, you’ll need to add your client’s contact information.

Like in the Ted’s Web example, include your client’s business name, the name of your contact person at the company, their business address, and all the relevant info for your point of contact (like their email address and telephone number).

Unique invoice number

Part of an invoice - unique invoice number

To make your record-keeping easier (and help you keep your sanity), give each of your invoices a unique number. Not only does a unique number help you differentiate invoices for two different clients, but it’s a life-saver when you need to differentiate projects from the same customer.

To establish a unique invoice number, one method is to use bookkeeping best practices. Essentially, you use a group of letters to refer to a specific client followed by a number. The number establishes the chronology of invoices for that specific customer, so it’s simple to look back in your records to establish a timeline of projects.

Here’s an example: One of your regular clients is another small business called Lisa’s Hair Salon. Based on the best practices outlined above, you can shorten the client name to LHS, LISA, or even LISAHS. Any of these abbreviations work just fine, as long as you can quickly recognize it in your own records as an invoice for Lisa’s Hair Salon.

Next, an invoice for this business would include a chronological series of numbers. The first few invoices numbers for this customer might look something like this:

  • LHS0001
  • LHS0002
  • LHS0003

Regardless of the naming convention you establish, just make sure it works for your business and your needs—as long as it makes sense to you, that’s all that matters.

Invoice date and due date

Part of an invoice - unique invoice number

Toward the top of your invoice, you’ll also need to include a set of dates. These dates denote when you sent the invoice to the client as well as when you expect to be paid for the work itemized in that specific invoice.

First, note the date that the invoice is sent (June 1, 2014, in the example above). Next, you’ll set the due date for payment. This is usually 15, 30, or 60 days after the invoicing date, depending on your preferences and your client’s pay cycles.

Itemized list of products or services

Part of an invoice - line items

Now that we’ve established all the minutiae of your invoice, here is where we dig into the meat. The bottom-line reason you’re sending an invoice in the first place is because you’ve completed work for a client and it’s time to get paid. In the next section, you’ll outline exactly what work you did and how much the client should pay you for those tasks.

In this section, you’ll itemize all the products or services you performed for that client over a specific period. You’ll also provide a brief summary of the project and details like the quantity and/or service rate.

You can create a chart similar to the example above, and include specifics like:

  • Date: Note the date the service or project was completed.
  • Quantity: How many products your client ordered, how many hours you put into a specific task (if you’re charging an hourly rate), or how many services you provided (i.e. 3 versions of a logo).
  • Description of products/services: A summary of the products or services you’ve done for your client.
  • Rate: The price per unit for products, your hourly rate for services, or your flat-rate per project.
  • Subtotal: The total cost for the products or services rendered for that specific time period.

Payment terms

One final section to include in your invoice is a brief summary of basic payment terms. While these terms might be thoroughly outlined in your freelancer or consultant contract, you can help ensure a more prompt payment.

A few of the items to include in this section are:

  • How you accept credit card payment, Paypal, checks, etc.
  • Include tax ID or HST number, if applicable
  • Outline late fees, incentives to pay the total amount before the due date, or other related terms

While these may feel like nitty-gritty details, including such terms can prevent unnecessary delays—which means you’re more likely to be paid faster.

Four common invoicing mistakes (and how to avoid them)

We get it—invoicing is not the reason you took the leap into freelancing or consulting. It’s at best a means to an end to get paid, and at worst, it’s an administrative pain that takes too much of your already-limited time.

However, invoicing is a crucial process that requires your full attention. It’s easy to make simple mistakes, which can cause errors in payment or lengthy delays that wreak havoc on your business’s cash flow.

To avoid some of the most common errors, we’ve rounded up a handful of the mistakes most likely to flumox anyone new to invoicing.

1. Procrastinating

Invoicing is a tedious task that is easy to put off. You got into freelancing or consulting to do great work—not mindless paperwork. But the longer you procrastinate on invoicing, the longer it takes for you to get paid. And everyone likes a little green, even for work they love.

To combat the possibility of procrastinating, set up recurring invoices for clients with whom you have ongoing projects. Using a tool like Wave, you can create an invoice once and set it up to automatically submit to your client as a specified time (i.e. the end of every month). This can help take some of the pesky admin work out of getting paid.

2. Not following up on unpaid invoices

Late payments will inevitably happen as a freelancer or consultant. Invoices fall through the cracks or get buried in someone’s email inbox. Whatever the reason, the payment could be further delayed if you don’t follow up with your client regarding the unpaid invoice.

Following up is something on your to-do list that’s easy to forget (we’ve done it). To make sure you remind your clients, you can set reminders for yourself through your online calendar. Set an alert to remind yourself to shoot your client a quick email.

If you prefer a more automated solution, you can use Wave's online payments features to set up automatic late payment reminders. This feature sends your client an email at various periods after your payment is due (i.e. three, five, or 10 days after the invoice due date).

You can also establish late fees to encourage customers to pay on time, but we’ll discuss that more below.

3. Sending your invoice to the wrong person

A surefire way to delay your payment is to send your invoice to the wrong person at your client’s company. This is a common error, but can be easily avoided.

To ensure you send off your invoices to the correct person or department, clarify this with your point of contact. The person you worked closely with on client projects may not be the correct person to receive those invoices—it could be more efficient to submit everything straight to the finance or payroll department. Clarify this with your client contact and save in your invoice template so that you won’t make this mistake moving forward.

4. Not knowing your client’s pay cycle

Not all of your clients will pay vendors or run payroll according to the same schedule. Some companies will run it every week while others only do so once a month.

Understanding your clients’ pay cycles can save you time and frustration when it comes time to send them your invoices. For example, your client Ted’s Car Wash only runs payroll monthly on the last day of the month. The payroll cutoff for that cycle is the 20th of each month, but you send your invoice on the 21st—a day after the cutoff. That means you’ll have to wait until the end of the next month for your invoice to be processed, which could disrupt your business’s cash flow.

To ensure you understand your client’s pay cycle and submit your invoices on time, clarify the timelines with your point of contact at the company or your client’s finance department. Mark it on your calendar and set a reminder to submit your invoice a day or two before the payroll cutoff.

Moving forward with your own invoices

Now that you have a solid grasp on the purpose of invoices, how they benefit businesses, and how to create and send them, deploying these itemized bills to clients should be a smoother process.

Chapter 3: Accepting payments from clients

When it comes to getting paid for your products or services, small business owners have never had more options than they do today. From online to mobile payments, new and better options abound—making it easier and more convenient than ever for customers to pay.

With all these options, how’s a business owner to know which payment methods to accept? Your customer base and the type of business you run will have an effect on which payment methods you should make a priority. In our increasingly digital world, businesses will benefit from accepting payments online. But what does “online payment” mean? What does it mean for your business?

In this chapter, we’ll dive into:

  • The different ways your business can accept payments
  • The pros and cons for each
  • Things to consider while making your decision
  • And, finally, our recommendation for how to accept payments

Let’s dive in!

Accepting payments online

In today’s marketplace, accepting online payments can feel like a given, but for small business owners, there’s a lot to consider before you get started.

From PayPal to Stripe, Venmo, and other payment processors, business owners and their customers alike have a lot of choices when it comes to paying and accepting payment online. No matter the provider, they all enable your customers to pay online using a credit card or directly from their bank account.

Let’s dig into what each of those means and the benefits they offer your business.

Credit and debit cards

Payment cards (credit, debit, and prepaid) are far and away the most common way we pay for things online. In fact, as much as 75% of consumers prefer to pay with their credit or debit cards. If that statistic isn’t enough to convince you to accept credit and debit card payments, let’s look at some of the pros and cons they can hold for your business and your customers.

Benefits of accepting debit and credit cards
  • Convenience for customers: The chief benefit of accepting debit and credit cards is their convenience. They make it overwhelmingly quick and easy for customers to pay, whether that’s online or in person. If your customers are other businesses, accepting credit cards can help grease the wheels of both their cash flow and yours. Not to mention, for many brick and mortar businesses, you risk losing out on customers who don’t carry cash anymore.
  • You get paid quickly: On top of that, credit and debit cards ensure you get paid quickly, too. Since customers can pay right away online, you can have that money in your bank account in as little as 2 business days.
  • Professional image: If customers are going to do business with you, it’s vital that they trust your business’s professionalism and legitimacy. Accepting credit and debit cards is one more way you can let customers know you’re a real business they can trust.
  • Fees: To accept credit and debit cards, you’ll work through a payment processor, and they will charge your business a fee. For most payment processors, credit card transactions incur a small fee of $0.60 plus 2.9% of the transaction value.
  • Payment security concerns: It’s important to consider privacy and security (both yours and your customers) when you’re processing payments. Small businesses need to learn about and understand what kinds of security measures and risk management practices payment processors have in place to protect them. The best payment processors constantly monitor transactions, but payment security is always important to consider.

Bank payments: Wire transfers, eChecks, and ACH processing

Bank transfers go by a variety of names these days. Wire transfers, eChecks, ACH processing, Zelle, e-transfers, and the list goes on. The gist is this: money gets sent directly from your customer’s bank account into yours.

Benefits of accepting bank transfers
  • You get paid quickly: Just like with credit cards, you can see payments hit your bank account in as little as a few days—much faster than waiting around for a standard check to clear.
  • Fees: Depending on your payment processor and your bank, the fees for processing bank transfers can be lower than credit card processing.
  • Fees: That’s right—this one’s a pro and a con. When you move money from one bank to another, the fees involved can vary widely from one type of bank transfer to another. For example, bank payments through Wave incur only a 1% fee, but wire transfers between banks can cost up to $30 per transaction.
  • Can be less convenient for customers: When customers pay through their bank, a few issues can pop up. Most notably, your customers have to have that money sitting in their bank account and ripe for a transfer (instead of having 21+ days to pay off a credit card balance, for example.) If you’re regularly processing large payments, that could put a strain on your customers’ cash flow.

Choosing a payment processor

The benefits to accepting payments online far outweigh the negatives, and for many businesses today, online payments are the only option. That’s why nearly all of today’s businesses accept them.

The next step is to choose a payment processing solution to run your credit, debit, and bank transfers through. As a Wave customer, you can process payments directly through Wave for your invoices and your payments will automatically reconcile with your accounting records.

If you’re looking to collect payments online without an invoice, one way is to use a payment link on your website.

The most important things to look for in a payment processor are:

  • Fees and pricing transparency
  • Where do you go to get support for transaction disputes, refunds, and other issues that may arise?
  • Ease of use
  • Contract requirements and terms
  • Fraud detection
  • Point-of-sale features and equipment (if you need it)

Accepting cash and check payments

A lot of commerce has moved online in recent years, but there’s still merit in accepting offline payments. For one, accepting offline payments like checks and cash usually doesn’t cost you anything, so it’s worthwhile to consider offering.

That being said, offline payments don’t make sense for plenty of businesses (like ecommerce businesses or freelancers.) Let’s talk about the benefits and drawbacks of accepting cash and checks.


Over the last decade or two, cash has fallen out of favor with the majority of consumers. It’s less convenient and secure than credit and debit cards—that’s why plenty of consumers have stopped carrying cash altogether.

Benefits of accepting cash
  • You get paid immediately: When you accept cash, the money is yours right away. No waiting for it to clear or be deposited into your bank account.
  • No cost to accept: Unlike credit cards or wire transfers, you won’t pay any fees to accept cash. You also won’t need any fancy point-of-sale equipment in order to accept cash.
  • More cumbersome to manage: With online payments, the money goes into your bank account without much intervention, if any, on your part. When you accept cash payments, you have to deposit it in person at your bank and make sure you record it for bookkeeping purposes, adding work to your plate and increasing your chances of accounting errors.
  • Only works for in-person transactions: Needless to say, your customers shouldn’t be sending you cash through the mail, so you’ll need to look into additional payment options for online transactions.
  • Less secure: Having cash on hand in your brick and mortar location can make you a target for theft—whether external or by employees.
When it makes sense

For most modern businesses, accepting cash isn’t really necessary. However, if your business has a brick and mortar location where you conduct sales, it makes sense to accept cash because it doesn’t cost you anything. Particularly for restaurants and retail businesses, accepting cash is a no-brainer.

Just make sure you offer additional payments methods, so you don’t miss out on cash-averse customers.


Physical checks come in a few different forms—most notably personal checks, business checks, and bank checks. Today, paper checks have largely disappeared from many industries. Fewer and fewer businesses still accept personal checks because of the lack of security and delays as you wait for the check to clear.

Benefits of accepting checks
  • Payment flexibility: Accepting checks from B2B customers can help your business seem more flexible. For service businesses (like freelancers or a house cleaning service), offering to accept checks can communicate your flexibility and willingness to work with your customers.
  • Better for large transactions: When customers have to pay a large amount, it’s often easier and more secure to use a check over cash.
  • No cost to accept: Like cash, you won’t pay any fees or need any expensive hardware in order to accept checks. The big exception is if a check bounces—some banks will charge you if you try to cash a check and it doesn’t clear, so take that into account.
  • Payment delays: When someone hands you a personal check, you haven’t actually been paid yet. Your payment isn’t secure until you cash or deposit the check and it clears—and checks can take several days or even a week to clear.
  • Less secure: Since you can’t guarantee payment until the check clears, you run the risk of losing out on the payment altogether. In the week it takes for a check to bounce, customers can disappear into the ether.
When it makes sense

Checks have decreased in popularity, just as cash has, but the convenience factor of cash doesn’t apply to checks as much. That means there’s not much to lose if you choose not to accept checks.

The one exception is if your business is service-based and involves interacting with the customer in person. For example, most landlords accept personal checks for rent payment, because it’s easier to handle than thousands of dollars in cash. The same goes for the housekeeping business we mentioned above.

While small businesses have more and more options for accepting payment via more convenient and secure methods, it makes sense for these businesses to demonstrate an openness to accepting what’s easiest for customers or clients.

Other things to consider when accepting payments

Now that you have the lay of the payment land, you should have a good feel for which payment options make the most sense for your business. That isn’t all you need to think about, though. On top of choosing the type of payment methods you’ll accept, there are a few other things to keep in mind when setting your payment terms.

Let’s talk about what else you’ll need to consider.

Mobile payments

We’ve already talked about the fanatical growth of online payments over the last few years. Inside that trend, mobile payments have seen the most growth—Statista predicts mobile payment revenue will top $1 trillion globally in 2019.

That’s why it’s important to plan for accepting mobile payments for your business—both online and in-person. Whether that’s Apple Pay, Samsung Pay, Google Pay, Masterpass, or any of the other mobile payment options popping up for consumers.

Payment security concerns

If you’ve been paying any attention at all over the last few years, you know that high-profile data breaches and hacking have become a big problem for a lot of businesses. From Target to Facebook, consumers are re-thinking who they entrust with their private payment information.

That means it’s your job to ensure your customers that your payment processes are secure and trustworthy. Using a well-known payment gateway (like PayPal or one of its alternatives) is one good way to do just that.

Source: ConversionXL  

You can also display prominent third-party security badges (like the ones above) on your payment pages online and near checkout in your brick and mortar.

Being flexible about payment methods

It’s easy to fall into the trap of accepting one payment method that makes sense for your business, but don’t stop there. While you shouldn’t compromise your cash flow or business efficiency to get paid, the more flexible you can be about payment methods, the more customers you can work with.

PaySimple puts it, “Offering multiple billing and payment methods increases satisfaction by improving customer experience. In addition to creating convenient ways to accept payments, having more options can reduce the time it takes your business to get paid.”

As we covered above, being flexible also lets customers know that you’re committed to making their lives easier, too.

Wrapping up

Our recommendation for the majority of businesses is to get paid online. While you’ll typically pay a small fee for online payments, it’s worth it to get your money faster and keep your cash flowing.

Online payments are also easier to keep track of since they can be automatically loaded into your accounting solution, and you won’t need to manage cash or deposits at a brick and mortar bank.

There’s a lot to consider when it comes to choosing which payment methods your business will accept and how you’ll get paid. By now, you should have all you need to decide what’s best for you and your customers.

Chapter 4: Handling payment issues

Money arriving in a mailbox

We all know how important a healthy cash flow is to any small business. Running out of money is one of the most common reasons businesses fail—but it’s hard to keep it under control when clients don’t pay on time. Or at all.

Despite all of your best efforts, sometimes getting paid doesn’t go as planned. In this article we’ll cover a few of the most common payment issues small businesses encounter, and specific steps you can take to prevent and fix them.

When clients are slow to pay

Slow payments are a notorious drain on cash flow for small businesses. According to Wave's latest report, 70% of small businesses have waited between one and six months to get paid as a result of overdue invoices. Waiting so long for payment makes it hard for entrepreneurs to pay their own bills and suppliers, or to procure inventory, staff, and supplies for the next job.

According to Jeff Longhurst, Chief Executive of the ABFA (the organization that did the study mentioned above): “Smaller businesses are particularly vulnerable. No matter how successful they are, if just a few invoices aren’t paid on time, they could end up in serious financial trouble.”

If a client is difficult or the revenue from the work isn’t significant to your bottom line, you might chalk it up to a lesson learned and choose not to work with that client again. But what if it’s a high-value, repeat client who isn’t paying on time? Rather than walking away, here are some steps you can take to help improve how fast you get paid.

Invoice clients immediately

You don’t need to wait until the end of the month to send your invoices out to clients. Instead of waiting for a specific “invoicing day,” submit your invoices as soon as a project is complete.

Establish the expectation that you’re going to submit invoices to your clients as soon as the work is complete. For example, a freelance writer might submit a draft to the client and then follow up shortly after with an invoice. Not only will your clients know when to expect invoices, the faster you submit them the sooner they’ll be paid.

Offer multiple payment options

One way to encourage on-time payments is to also offer your clients multiple ways to pay. Different companies’ accounting departments might handle payments differently, so accepting multiple methods helps set you up for success. Some of the easiest methods to set up and accept are credit cards, bank payments/wire transfers, direct deposit (they’ll need your bank account information for this) PayPal, and paper checks. We outline the pros and cons of the different payment types in more detail here.

When you’re first building a relationship with your client, highlight the different payment methods you accept, and the ones you prefer. Try to nudge them toward electronic payment options because paying by check takes far longer since they often send it by mail, and banks will often hold the funds for a period of time after you deposit it to make sure it clears.

Create a contract (and stipulate a late fee)

When you take on new work, it’s wise to get a service agreement in place. Not only does a formal contract protect you and your business, it also helps you initiate the sometimes-awkward conversation about payment dates.

Make sure you negotiate and outline payment frequency (semi-monthly, monthly), specific payment dates, and preferred payment options. If you want to be paid by direct deposit within 15 days of sending your invoice, for example, you can specify those terms in your agreement. The Balance offers several great contract templates to use.

A service agreement is also an ideal place to highlight late fees for delinquent payments. Charging an additional amount on top of your service fees is a great incentive for clients to pay up and on time. You can charge a flat fee (i.e. $25 for payments up to five days late) or a percentage of the total invoice (5% of the total for payments up to seven days late, and 7.5% for payments after that). The amount doesn’t have to be huge—it’s meant to be a small penalty that will serve as an incentive for clients to stay on top of payments.

Consider also adding a subtle reminder of payment dates and late fees, including your terms, in the footer of each invoice.

Request a deposit/retainer

Another way to help ensure you get paid on time is to ask for partial payment upfront. It’s common to ask clients for a deposit before beginning work and then invoice for the remainder once the project is complete.

For example, wedding photographers often require a non-refundable retainer for approximately 30% of the service price to “hold the date” of the event. This ensures a photographer won’t double book themselves, and also offers partial payment that covers some of the prep work photographers do prior to their client’s big day.

Automate invoices and payment reminders

If you have an ongoing relationship with a client, use an invoicing platform to automate your invoices. Setting up recurring invoices saves both you and your client time (no need to manually create all those duplicate invoices every month).

Just put your client’s credit card information into your invoicing tool, and it will charge your client automatically on a specified date.

Instead of automating recurring invoices, you can also set up automatic emails to gently remind clients about upcoming or late payments. Draft up your email and schedule it to send to clients three to five days before their payment is due, and/or three to five days after the due date. While this might seem like overkill, these emails will help you get paid faster and save your clients from paying late fees.

When clients don’t pay

The Freelancers Union reported that 44% of their members have issues getting paid. In fact they carry an average of over $10,000 in unpaid invoices, the equivalent of 36 hours of work just to track down each missing payment.

And in a survey from the Freelancer Club, freelancers said they worked an average of 31 unpaid days over the previous two years. That adds up to about three work weeks of unpaid labour every year—a cost that few entrepreneurs can afford.

While having some unpaid invoices might be a cost of doing business, there are some strategies to help you collect on those unpaid invoices.

Send a final notice letter

If you’ve sent multiple emails to remind a client of their past-due invoice to no avail, then it might be time to kick up your communications a notch.

If your invoices and payment requests are ignored, the Freelancers Union suggests sending your  client a certified letter. In the letter, highlight your agreed-upon payment terms and what their financial obligations are. Reiterate what is owed and set a clear deadline for payment. To really emphasize that you mean business, get a lawyer to co-sign the letter.

Settle with a mutual release

If you’re ready to simply move past your non-payment nightmare, there is another option: settling.

Essentially, you draft up a document called a mutual release. In this document, you outline the terms of your settlement—or a one-time discount to help you recover some of that bad debt and wipe the slate clean. Make sure you get the discounted amount and agreed-upon payment deadline in writing.

Retain a collections agency

Sometimes it takes an authoritative third-party to collect on those unpaid invoices, which is where a collections agency can help.

Typically, if you have a contract in place proving you had a work agreement and the client hasn’t disputed the payment owed, then you can pass that debt onto a collections agency. These agencies specialize in recovering cash from parties responsible for delinquent payments, so they may be successful where you weren’t.

For more information on finding and hiring a collections agency, check out this piece from Business News Daily.

Take clients to small claims court

If you’ve exhausted all your other options, freelancers and entrepreneurs can consider litigation. Sometimes the threat of going to small claims court is enough to scare delinquent clients into paying up.

While small claims court is a viable option, legal fees can start piling up and even if you win, sometimes it can still be difficult to collect on unpaid debts.

If small claims court is an option you want to explore, go through this Freelancers Union checklist to make sure your case is ready to review.

When you get a chargeback

Another payment issue that you might have to tackle if you accept credit card payments is a chargeback. That’s the term used when a customer formally disputes a credit card transaction with their card provider. The chargeback process exists to protect consumers from credit card theft or scams by fraudulent companies.

Sometimes chargebacks are unjustified (i.e. customers attempting to commit fraud), but more often they stem from a difference of opinion between the customer and the business owner about the completion or quality of the work done or the product sold.

That’s when chargebacks become an issue for you as a small business owner. You have to be prepared to prove that the transaction was fair, and to defend your side of the argument. If you can’t, you’ll need to return the money to the customer—a costly mistake.

When a chargeback dispute happens it’s the cardholder’s bank that makes the decision, so it’s very important to be prepared ahead of time with the right documents. Here are some steps every business owner needs to take to protect themselves from chargebacks.

Keep good sales records every step of the way

When you get a chargeback, you’ll need to give evidence that your customer was given the right information up front and that they agreed to your terms. The first step is to have a contract in place (see above for tips on contracts) that clearly lays out what you will and won’t provide.

Follow up on any conversations had on the phone or in person with an email summarizing what was discussed, and ask them to email back their agreement so you have it in writing. Save all communications and documents that prove items were purchased and shipped.

For any type of recurring payment or subscription service, get an agreement with the customer in writing. Make sure the payment schedule is clearly outlined, along with what will happen if they cancel before the contract period is up.

Make sure to include enough detail in your invoices

Disputes about work quality and scope can be solved by making sure your invoices and service agreements have a lot of detail about the work to be done, and how and when it will be completed.

Using an invoice template or online invoicing service with customizable fields can be helpful, as you can add as much detail as you want to your invoices. Adding notes and reminders to your invoice makes it harder for a dissatisfied customer to come back later and dispute the work you’ve done. Putting details in writing means there’s less chance of forgotten conversations and misunderstandings.

Represent your offerings honestly and clearly

If you’re selling products online, make sure to provide good photos and descriptions so people know exactly what they’re getting. Don’t photoshop them heavily to make them look more appealing—go too far and you might be accused of false advertising.

For services, detail exactly what’s to be included and excluded in your contract. You should also outline what you’re willing to guarantee and what you’re not. If your project timeline depends on getting feedback or materials from your client in a timely manner, make sure you explain that the deadlines are only guaranteed if client input is given on schedule.

Pay attention to the details

Sometimes chargebacks happen because of small details that get overlooked, so paying attention to the small things matters. For example, does the name on the client’s credit card match your contact? If not, make sure to get the actual cardholder to authorize the transaction, along with their address, email, and phone number.

Similarly, if your company name is different from the business name that will show up on the client’s credit card statement (e.g., there’s a parent company name that’s used for financial purposes), be sure to let your client know about it before charging their card.

When you get targeted by a scammer

Scams targeting small business owners are really common. The Association of Certified Fraud Examiners (ACFE) reported in 2016 that the typical organization loses 5% of revenues each year to fraud.

Scams are happening on a wide scale, and they’re becoming more and more sophisticated. Here are some general tips you can follow to avoid payment scams and protect your business from the financial fallout they cause.

Watch for red flags in the details

There are often clues present in the emails you receive from a would-be client that, if noticed, could save you from getting scammed.

One of them lies in the actual email address itself. Scammers often use email generator tools online to make fake email addresses that look legitimate, but there are still clues. For example, if the email address includes the current year, that’s a sign that it’s just been created (e.g., Most real clients won’t have a brand new email address with the current year referenced in it.

Similarly, the domain “gmx” in our example is another clue. Most clients will have recognizable domains (gmail, hotmail, yahoo, or a company name). If you don’t recognize the domain or it seems altered (i.e. “”), it could be fake.

Notice the tone and writing style of email communications

A red flag that often gets missed is how email communications from scammers are written. While a typical customer email might have the odd typo, scammers are often writing in a second language, which will be evident by unusual word choice and an unusual number of spelling and grammatical errors.

Scammers often use the same emails over and over again to try to lure customers. If an email seems fishy, try copying part of it into Google and doing a search to see if it comes up in results. Another business may have already fallen for that scam and posted a warning online with the scammer’s email address and content.

Another red flag is the tone of the email being overly urgent. Scammers don’t want to give you time to think because then you might realize things aren’t adding up. By pushing for an urgent order, they get you to act quickly so that the red flags don’t have a chance to sink in until it’s too late.

Ask yourself if the story makes sense

Sometimes the best way to figure out if you’re about to be scammed is to take all the pieces together and ask yourself if the overall story makes sense.

For example, would someone place a rush order for printed business cards from California when they’re based in New Jersey? Maybe—if your company is considerably cheaper than most businesses or you offer something unique that’s difficult to find. But if your products are standard and they’re not unusually cheap, why would someone make a rush order from a different state, pay the extra shipping fees, and run a much greater risk that the order won’t arrive on time when there are plenty of local options?

Sometimes when you look at the bigger picture and put yourself into the customer’s shoes, you’ll realize that the story you’re getting from the customer doesn’t make sense or doesn’t fit the behaviour that you’re used to from similar customers.

Final thoughts

While it’s impossible to prevent every late payment or unpaid invoice, there are a number of steps you can take to keep payment issues less likely and minimize the cost to your business.

Putting proper contracts in place, keeping good records, invoicing on time, and understanding payment scams and chargebacks are all ways you can take control of customer payments—and your cash flow.

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Starting at
2.9% + $0.60
per credit card transaction
Starting at
2.9% + $0*
per credit card transaction
for first 10 transactions/mo
Unlimited invoices, estimates, bills
Add your logo and brand colors
Automate late payment reminders
with online payments
Wave mobile app
Unlimited bookkeeping records
Dashboard and reports
Auto-import transactions
Auto-merge transactions
Auto-categorize transactions
Add users
Live-person chat and email support
with any paid add-on
Digitally capture unlimited receipts
additional fee
additional fee
additional fee
Hire a bookkeeper
additional fee
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The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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