Accepting Online Payments Part One: Why You Want to Accept Online Payments

At FreshBooks, we get a lot of people asking about using online payments for their business and wondering if it is worth the setup hassle and fees.

We thought it would be great to share some thoughts on online payment, collected from our experiences over the past few years, in a three-part series titled, “Accepting Online Payments: The Ultimate Guide” .  For the second post, click here: How Do Payment Gateways Work and How Do I Choose One? For the final post, click here: So Which Payment Gateway Should I Choose?

For the first post, let’s start with the question of how to decide if it’s worth it for your business.

Part One: Why do I want to start collecting Online Payments for my invoices?

Simply: to improve your cashflow.

Have you ever run out of cash waiting for a client check? Did your business grind to a halt because of a missed payment? Then online payments might be for you.

Online payments give you the ability to accept credit cards through the payment gateway itself, or through a third-party add-on like FreshBooks, without a lot of trouble or delay. What does this mean? Your clients can now pay you quickly with a credit card and the money is in your bank much faster.

This will increase your cashflow; important for any business. You no longer need to wait for a physical check to show up in the mail, then go to the bank to deposit it, and then wait three to five days for the funds to clear before you can access them (it also means you can pay yourself or staff that much faster).

Also, if you want to charge your client’s credit card on a recurring basis (like monthly or quarterly), online payments can allow you to do that in an automated way as well. It makes recurring revenue (cash) very reliable and predictable.

For all this convenience and improvement in cashflow, as with all things in life, there are a few costs. The costs are worth every penny, in my opinion, but we should take a minute here to run through them so you know what to expect.

What are the costs of using online payment gateways?

Most payment gateways will charge a monthly fee and/or a “discount rate” (2-4% of the sale). Monthly fees are generally charged for the premium options, which could include better support, a smoother client interface, personal branding and other functions.

When evaluating any cost for your business, you always want to balance the straight-up costs against the additional value it brings to you and your business. If you can get paid faster (usually weeks), how much is that worth for you?  Here’s one way to look at those costs and how to know when a gateway is right for you.

Also, with some payment gateways, there is some hassle to move your money over to your bank account. This is not always the case, but when you first start out with a payment gateway, you will need to become a trusted partner. With payment gateways that require a merchant account, your funds will be deposited directly into that account (merchant accounts will be explained in the next post).


At FreshBooks, we are big believers in giving your customers an easy option to pay. Removing any barriers to payment will increase your cashflow, and that is arguably the best thing you can do for your small business.

In the next post, we will go through how payment gateways work in more detail.

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  • James B

    I love freshbooks, but I had to end up building my own back end payment gateway, because you guys aren’t compatible with anything down in Australia. It would be great to be able to have the option of attaching my own payment gateway link as part of the “Pay Online” option… Any chance?

  • John Coates

    Hey James,

    It’s a good question. We do have a couple of payment gateway options for FreshBooks customers in Australia. Both PayPal and 2Checkout work in Australia – although I know they’re not necessarily ideal solutions in every customer situation.

    Our QA processes to integrate new payment gateway providers, or API credit card functionality, are pretty rigorous, as you can imagine – we have to set some very stringent criteria around anything that deals directly with customers’ credit cards. We’re always willing to evaluate alternative payment gateways if there’s enough customer demand. If you want us to look at your preferred payment gateway, feel free to ping support and we’ll add it to the list.

  • Randy Comeau – CEO/SEO – nuMantis

    I certainly see the use of an online payment gateway, however, does anyone see it viable for a web company such as ours? We do internet marketing and website development as services. I know what you are thinking why is a web company asking this. the issue is that most of our projects are not a-la-carte they are all custom jobs and there isn’t really any set price list.

  • John Coates

    Randy – your situation is similar to a lot of FreshBooks customers, actually, and quite a lot of them already have online payment gateways in place in their accounts. It’s a convenience thing for their clients: allows people to click a direct link to the invoice and pay online with a credit card immediately.

    You might be thinking of an eCommerce setup, where online customers are shopping for specific items from a price list. That’s one use of a payment gateway, but not the only way of working. You could bill for a few hours of ad hoc SEO consulting, a full website redesign or an annual web hosting contract and offer instant online payment right from the invoice for any of these options.

  • Ian

    I have a merchant account provider I want to use. Can I integrate Freshbooks invoices with my current merchant account? I don’t want to use Paypal or googlecheckout.

  • John Coates

    Ian – you can integrate your current merchant account with most payment gateways that integrate with FreshBooks, such as (
    The second blogpost in the series will cover this in more detail.

  • Bryan Johnson

    Merchants need to be very careful when storing their customers credit card data with a gateway because most will hold it hostage if they ever want to move to a different provider. It’s a huge gotcha with big implications.

    To address this problem, we recently created the Credit Card Data Portability Standard. You can read more about it here:

    Bryan Johnson

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  • Jared Detroit

    I’ve gone back and forth on this as I like checks for receiving the full amount but like online payments for how quick and easy it is. I think my solution is to do a good mix of both. I have some clients that are very quick to pay with checks and one client that I work in the same building as. These clients I will continue to bill via checks.

    For newer clients I’m unsure of or consistently late paying clients, I will switch them to online billing. To a previous poster, I’m in the web design & Internet marketing field as well.

  • Napa Web Designer

    I am a web designer and developer in Napa Valley, CA. I use Freshbooks, as my payment gateway, and Merchant Warehouse as my Merchant provider.

    My invoice amounts are all over the place because I too do custom work which is always different, but that does not matter. I also don’t like to lose to much on processing fees, which can add up when someone uses a corporate card. I only accept Visa/Mastercard because Amex seems to much to me and most people have Visa/Mastercard as an option.

    I have simple statement as pert of my terms, “Checks preferred. Visa / Mastercard happily accepted.
    Invoices over $1,000 – Please pay by Check (lose too much in transaction fees).”

    When I am sending out invoices over $1,000, if I remember, I use the handy toggle checkmark on the invoice to specify that this invoice cannot be paid with a credit card – then it simply is not an option for that invoice.

    That way, it is up to my clients to use the convenience of credit card payment if they like. Most pay by check. And because I host as well, as mentioned in the article, it is handy to be able to charge monthly fees automatically. Just thought I would share my experience.

  • John Coates

    Hi Napa Web Designer – Good tips, thanks. Everyone has their own workflow, I find – good to know that you’ve settled on a process that works for you.

  • Kudzai

    I too have something similar to what Napa Web Designer has said. With my company, what I do is when I get a project with the client, I inform the that they can pay by check, or if they’d like the to use the convenient online payment option, there’s a 3% fee added to the invoice. So for example, If I have a client paying $99/month, they can opt for online payments, and then we change their monthly invoice in Freshbooks to $101.97. Its worked well, and we use Paypal and Google Checkout and everyone is happy :)

  • Thomas

    Be careful about adding a surcharge for clients to use credit cards to pay. In most cases it violates your merchant agreement. CC companies want us, as vendors, to give people the same ability to pay with cash, check, or credit card – without any fees. I saw some companies in the past doing it as a “Cash Discount” instead of a “Credit Card Fee”. So, for all invoices they would automatically tack on 3-4%, but if someone paid with check/cash, it would line item a discount for it as a 3-4% discount fee. Semantics, but be careful as it only takes one complaint to hose up your merchant account (held monies, suspension, etc).

  • denim

    nice article. it’s a very important for me

  • toronto internet marketing

    Online shoppers commonly use credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:

    * Debit card
    * Various types of electronic money
    * Cash on delivery (C.O.D., offered by very few online stores)
    * Cheque
    * Wire transfer/delivery on payment
    * Postal money order
    * Reverse SMS billing to mobile phones
    * Gift cards

  • Online payments

    Very informative post. Thank you for sharing this with us, I got a lot out of it.

  • Ramesh

    Excellent article, thanks for posting. that cost of using online payment is added more value. the business which are using Ecommerce and providers of Ecommerce should consider all these aspects

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  • Robert Wilson

    On-line billing cannot be accessed by people who do not have a computer especially pensioners who are not computer savy

  • deck and fence store

    I just signed up for the trial, I can’t seem to find out the different methods of payments via invoices. Can you help me out? thanks