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3 Types of Hidden Costs That Help Greedier Invoicing Apps to Get You

3-types-of-hidden-costs-that-help-greedier-invoicing-apps-to-get-youInvoicing clients online has never been easier. Dozens of invoicing apps are available online for a nominal fee or even free. No more stamps, envelopes and paper invoices. Perhaps more importantly, no wait until your invoice is received so that your payment can be processed.

But with so many cloud-based invoicing tools available, how is a small business owner or freelancer to know which one’s best? A number of factors come into play, including price, ease of use, payment processor gateway integration and design capabilities, and each one of these criteria is fraught with complexities – but especially pricing. Each tool has its own licensing fee structure with its own system of quotas. Moreover, every invoicing app wants to gain as many customers as possible, so they all try to attract users by claiming to provide better value than every other invoicing app. As a result, trying to compare apples to apples can be tricky.

Before you make your selection, it’s a good idea to familiarize yourself with the various lock-ins, limitations and hidden fees that commonly come up as people use these apps. By gaining an understanding of the most popular ways that invoicing tools get their users to spend more, you’ll know what to look for when picking the best one for you. Here are three hidden costs that invoicing apps commonly get people to pay extra to have access to.

1. Volume of client records

Invoicing apps like FreshBooks and Harvest only allow you to invoice three or four clients using their free plans. This is fine for freelancers who are just starting out, or who have a small volume of customers monopolizing their time. But most freelancers will quickly outgrow these “free” plans.

These leading invoicing apps are counting on you growing dependent on their systems for your ongoing cash flow and reporting needs and therefore being unwilling to switch to a cheaper option once your customer base grows. The FreshBooks website, for example, has a tab labeled “Pricing,” but if you click on it, you will be taken to an offer to sign up for a free trial. You can only find out about the details of their fees, starting at $20 per month for the cheapest option, once you are logged in. Harvest is more transparent on its Pricing page, but the site’s homepage sports a large call to action button encouraging people to sign up for the free plan.

Both apps are counting on the fact that you will be seduced by the word “Free,” and you won’t look too deeply into the added costs of invoicing more clients.

2. Recurring payment profiles

Some apps catch you by excluding recurring payments from their free plans. If your business model involves maintaining customers on a subscription-based service retainer, then this is for sure something to look out for, as automating your billing is going to make or break your ability to scale. If taking on a new client means chasing after more payments manually every single month, then you won’t be able to have such a high volume of business.

Nutcache, for instance, offers recurring payments only for “Pro” users who pay $14 per month. When you visit the Nutcache homepage, you are greeted by a full-width background video featuring a smiling young woman and animated text proclaiming that Nutcache is free. It’s only when you dig deeper that you find out which features are missing from the free version.

FreshBooks accounts come with five auto-billing profiles, but if you need more than that, it will run you an extra $10 each month, which, of course, is not mentioned on their Pricing page or their primary Support page for subscription billing. Many other tools don’t support this feature at all. FreshBooks, Nutcache and similar apps are counting on the fact that you will want this feature enough to cough up significant fees each month.

3. Gateway processor options

The ability to accept payments online is crucial for most freelancers. It allows you to easily collect from clients with shorter lag times involved with receiving payment. What’s more, it’s all automated – when a customer issues a payment via a cloud-based invoice, the money will appear in your bank account, and the payment will appear in your books already having been associated with the relevant invoice, and all you had to do was click “Send.” Businesses that commonly deal with international clients find this feature to be especially important, but even people who regularly meet with clients in person can benefit from the value of being exempt from chasing after and depositing checks and cash.

However, to accept payments online, you’re going to need an account with a credit card processing gateway, another decision that involves whole world of research unto itself. Not all payment gateways are created equal, and you may already have an account with one or two that you enjoy working with. Some gateways provide the best value to merchants with a high volume of transactions with low sums, others for cases with low volume of higher sums, and then there’s the middle ground – literally dozens of options that might represent top value for some freelancers and a major money pit for others.

While Invoice Ninja works with over 30 different integrated payment gateway options that you can choose from, other platforms are far more limiting. FreshBooks works with less than 50% of that volume, Zoho Invoice supports just six, while other leaders like Wave, Invoiceable and InvoiceOcean each only with one. These apps are making money from exclusive, near-exclusive or even affiliate deals with their own partner gateways, and their customers suffer from reduced options and the requirement to sign up for platforms that might ultimately cost them more. FreshBooks recently rolled out their own processor tool, giving them yet another way to earn from their users.

Finding the best value

Like many SaaS tools, most leading invoicing apps are based on the “freemium” business model, whereby they earn money by limiting the free features, using the product itself as a marketing tool that encourages users to first get hooked and then pay fees that are not necessarily so transparent upon registration.

Although it’s hard to find invoicing apps that offer significantly higher value than the market leaders, it’s not impossible. The bigger gateways all offer their own extremely simple invoicing modules, and there are also options like Invoice Ninja, which is open source and offers a properly full-featured free plan. Before deciding on invoicing software, it’s important to drill down into all of the relevant terms and fees, so you can see where the hidden costs lie. Determine whether these costs are relevant to you, and use this criterion to find a tool that won’t become expensive for you down the line.

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Invoicing clients online has never been easier. Dozens of invoicing apps are available online for a nominal fee or even free. No more stamps, envelopes and paper invoices. Perhaps more importantly, no wait until your invoice is received so that your payment can be processed. But with so many cloud-based...