You’re not the only merchant who has got an unexpected percentage based processing fee on a payment after sending an invoice to one of your clients. Many businesses don’t know about these fees until after their first transaction is done. Even a small percentage fee on a large invoice can actually mean a lot of cost that could have been avoided.
Most payment processors charge a fee that is based on a percentage of each transaction. This model can slowly eat away the margins for businesses that send invoices to clients, especially for big sales. The problem that you have highlighted is rarely made clear at the time of setup, and many business owners only find out how much it really costs after their first real transaction happens. The reality is you can actually save thousands of pounds, dollars, or euros every year by knowing how payment processing fees truly work and picking the right payment instrument and service providers for your business.
The Reason Why This Happens
Payment processors usually charge a blended or tiered rate on each transaction that is done via their merchant account solution. This rate is usually between 1.5% and 3.5%, depending on the type of card, payment method, and business type. The processor treats the payment the same way as an online card transaction when you send a PDF invoice with a payment link. They charge their normal rate.
Unless your account is set up for that type of payment, there is no automatic discount given for B2B or invoice-based payments. When your customer clicks on the invoice pay now link, then the customer is taken to the hosted payment page, and there the customer submits card details/ echeck information or ACH details.
This fee is not a big deal for transactions with low value. However, it is important to know that a 3% fee can add up to a lot of money on every sale for high-value invoices, which are pretty common in B2B, professional services, wholesale, and consulting-related transactions.
Common Reasons Why Businesses Have to Pay Extra Fees for Processing Invoices
Using a payment platform for consumers or a group of people that is not really made for high-value B2B invoice payments
No clear fee disclosure during onboarding. Many platforms hide their percentage rates in the terms of service instead of showing them during setup. You know long agreements, and merchants miss seeing them.
Payments on invoices made with a credit card. When clients pay invoices with a credit card, then the processors charge the full card transaction rate, which is higher than the rate for bank transfers or ACH payments.
No interchange optimization: When B2B transactions are done correctly, then merchants may get lower interchange rates, but most standard platforms don’t do this automatically.
No pricing based on volume: Businesses that process more than a certain amount of transactions each month can actually negotiate lower rates with the PSP but aggregated platforms generally don’t offer this type of pricing. They sell at standard rates to everyone.
Flat rate pricing models: Some platforms charge the same percentage no matter how big the transaction is. This means that a £50 invoice payment and a £50,000 website payment are all treated the same.
How You Can Fix This Problem or Avoid It
If you are currently losing a lot of money because of invoice processing fees, then do the following.
Check your processor’s full list of fees. Explore the term sheet. Pay close attention to card-not-present rates, B2B rates, and any options for surcharging that let you pass the fee on to the client. Surcharging is a powerful tool, and many merchants in the US use it.
When you can, then make sure you switch invoice card payments to bank transfer. Direct bank transfers using modes like BACS, SEPA and ACH all have much lower fees than card payments and are the standard norm in B2B settings.
Ask your payment processor about interchange-plus pricing. This model truly passes on the real interchange cost instead of using a flat rate percentage, and as per our experience, it is always cheaper for transactions with high values.
Ask your payment processor for a custom rate or switch to a low-cost provider that offers better pricing if your monthly processing volume can justify it.
Think about adding a surcharge. In many places across the US, businesses can easily add processing fees to the invoice as a separate line item as long as it is made clear and is compliant.
Do This To never have this happen again:
Use a payment system that is made just for B2B invoice payments and big transactions. look for Invoice payment gateways and B2B credit card processors.
Find a payments consultant or processor that can really help you set up your merchant account approval based on your real transaction profile, which includes your average ticket size, payment method mix, and monthly volume.
Before you start doing business, you must make sure that your merchant account terms include clear payment schedules and agreed processing rates.
As per our experience, if you use a dedicated merchant account, then it will almost always be cheaper on a percentage basis than an aggregated platform for businesses with high average order values.
The Best Payment Options for Businesses That Send Invoices and Have High Value
Standard aggregated payment platforms that give instant approval or same-day approvals are made for consumer transactions that happen often but are not worth much. They use a fixed percentage pricing because it works for them when they have a lot of customers, but it will always hurt businesses with big average ticket sizes.
If your business bills clients a lot of money, then the best solution is a merchant account that is set up based on your actual transaction profile and has processing rates that are actually based on your volume and average order value.
Things to look for:
Look for Interchange-plus or cost-plus pricing instead of flat-rate percentage models.
Make sure you get support for paying invoices with bank transfers. ACH/Echeck/SEPA in addition to credit and debit cards
A dedicated merchant account with a named account manager who can look over and improve your fee structure.
Clearly written, easy-to-understand terms that help you understand all fees, including processing, gateway, monthly, and any costs for converting currency.
Integration of payment gateways that support professional invoice workflows like QuickBooks, XERO and Zoho easily.
QuadraPay works with various acquiring partners in the US, UK, EU, and EEA and helps businesses in those nations in finding the right invoice payment solutions. This is true whether you are processing high-value B2B invoices or you are working in a complicated merchant category like CBD, Vape, AI, Astrology, Property management , or just paying more in fees than you should be.
If you run an invoice-based business, then feel free to talk to our team about how to connect our invoice payment gateway solution with your business website or accounting software.