Card Payment Fees Part 1

This article is part 1 of a 2-part article. In this article, I focus on the Card Payment processing feature introduced in the ServiceM8 12 update in October 2023. I explore the ins and outs of how the feature works, along with some of its quirks.

In part 2, I look at some potential strategies that a business could employ for the Card Payment setting, and how to combine it with email and invoice templates for a more nuanced way of handling how customers settle their invoices.

TL;DR

ServiceM8’s Card Payment fee option is a game-changer, allowing businesses to pass Stripe fees to customers, ensuring invoices retain their full value. The feature is easy to use with ‘set-and-forget’ presets and updated accounting integrations for Xero, QuickBooks, and MYOB, catering to diverse financial practices. While not perfect—missing the additional $0.30 transaction fee in calculations—it’s a significant step towards financial efficiency. Businesses can now maintain control over their earnings with this new tool, though there’s room for ServiceM8 to refine and perfect this option further.

The Card Payment fee option

The introduction of the Card Payment fee option by ServiceM8 was like music to the ears of businesses everywhere. The countdown to this feature has been a long one, clocking in at eight and a half years of eager anticipation.

At WorkM8 Consulting, the rollout of this feature was met with a mix of emotions. You see, we were on the cusp of unveiling our own add-on to solve this very issue. Don’t get me wrong—I’m all for having a sleek, native solution rather than having to juggle an external add-on, even if it meant our own creation was about to be overshadowed.

Now that the initial excitement has simmered down, we’ve had the chance to really get to grips with the nitty-gritty of how ServiceM8’s Card Payment fee option operates. And sure, it’s not without its quirks. The drawbacks are there, but they’re not showstoppers by any stretch. The crux of the matter is how you plan to deal with passing on those fees to your customers. Depending on your strategy, ServiceM8’s shiny new feature might fit like a glove, or it might be a square peg in a round hole.

So, while we tip our hats to ServiceM8 for addressing a long-standing request, it’s worth taking a beat to consider how it aligns with your business’s approach to handling fees. After all, every feature has its stage, and it’s all about finding the right spotlight for it in your operations.

What makes this feature important?

There was a time when the reality of card processing fees from Stripe and ServiceM8 felt like an inevitable business expense. Companies faced a choice: hike up prices across the board to recoup these costs or shrug and accept that Stripe took its cut.

But now, there’s a shift in the winds. The introduction of a new option to tack on those pesky Stripe and ServiceM8 processing fees directly onto the invoice total is a game-changer. In essence, this means your $100 invoice retains its full value when customers pay with a card. Your earnings get to stay whole—pretty sweet, right?

Activating this feature is a breeze. Just dive into your Online Dashboard, march straight to Settings, and slip into Preferences. Once you’re in the Invoicing playground, provided Stripe is already your partner in crime, you’ll spot the shiny new Card Payments setting waiting for you.

Here’s where you can flex your preferences on when to apply the processing fee:

• Never
• For payments over $500
• For payments over $1000
• For payments over $2000
• For payments over $5000
• Always

Pick your strategy, and you’re golden. From this point on, every time a customer settles their invoice online with a credit or debit card, ServiceM8 will politely add the card processing fee to your invoice amount. So instead of your invoice being a “nearly there,” it’s a “right on the money.” Well, almost ­– something I’ll explain later in this article.

In the meantime, this little update puts the power back in your hands, ensuring that when you charge a hundred bucks, you’ll actually see that hundred bucks—minus the hassle, plus the convenience.

The good bits

The feature itself is like a magic trick—remarkably straightforward. It’s the epitome of a ‘set-and-forget’ function, designed to blend seamlessly into your business operations.

Most businesses, I’d wager, will go for the ‘Always’ option. It’s the epitome of simplicity—set it up once, and it does the heavy lifting for you thereafter.

But there’s more to this update than meets the eye. ServiceM8 didn’t stop at the payment feature; they’ve gone and polished the accounting system integrations with Xero, QuickBooks Online, and MYOB too. The motive? To ensure smooth sailing when it comes to your books.

Here’s the scenario: You send out an invoice for $1000, and that’s the number your accounting system knows. But if your customer opts to pay with a card, they’ll fork out an additional $20 to $32 for Stripe fees, depending on where you’re doing business. This kind of mismatch used to be a headache for the accounting software, scrambling to reconcile the differences.

ServiceM8’s clever workaround is after you approve an invoice, and if your customer then pays by card, ServiceM8 will auto-update the invoice in your accounting software with the surcharge. But more than that, this tweak will also let you manually adjust any unpaid invoice in your system even after it’s been sent to your accounting system. This changes then mirrors across platforms, syncing up without a fuss. Before this update, such a move would’ve sent back error messages and warnings, but now? Smooth as silk.

So, even if you’re not on board with passing on card payment fees, this new feature is a nifty addition to your toolkit. It’s all about giving you more control and less to worry about, ensuring your focus remains on your business, not on battling with your software.

The not-so-good bits

After spending some time reviewing how the feature works, it turns out that it is not all good news, with some definite gaps in the way the feature works.

Preset options are limiting

When you first encounter the preset options, they appear to offer a neat, effortless decision-making process. The simplicity is appealing – no need for excessive deliberation. Yet, the implementation of these presets might be overly simplistic, which becomes apparent upon closer examination.

Take, for instance, the ‘Always’ and ‘Never’ options for applying certain settings, such as processing fees to invoices. They’re straightforward enough, but the rationale behind the other existing presets is less clear. ServiceM8’s rationale is that you can set it so it will only apply the surcharge to payments over a certain amount “to promote fast & convenient payment on smaller jobs.” The setting assumes businesses will only prefer to recover processing fees only on more substantial invoices, thereby absorbing the costs for smaller transactions. 

If you are the type of business that will pass the card payment fee onto your customer, it is very likely you’ll want to be doing that for all card payment fees, not only for the larger jobs, but especially the smaller ones.  

I might be overlooking a glaringly obvious reason, but currently, the practicality of the “For payments over $500 / $1000 / $2000 / $5000” presets escapes me. I’m at a loss as to who benefits from these particular settings.

Let’s dive into geographical considerations.

United States

In the United States, businesses might routinely opt for the ‘Always’ preset. Credit card transactions are part and parcel of the American lifestyle, fees included. And despite being in the age of digital banking, cheques remain surprisingly prevalent, and fee-less bank transfers aren’t the norm.

United Kingdom

On the other hand, you have the UK scene, where the ‘Never’ option would likely be the default. It’s illegal there to pass processing fees onto customers, so the choice is essentially made for businesses.

Australia and New Zealand

Now, turning to Australia and New Zealand, we encounter a different story. Here, if presets were tailored to “For payments under $500 / $1000 / $2000 / $5000,” they’d resonate more. Unlike the UK, it’s permissible to charge customers the processing fee, and unlike the US, both countries have long enjoyed the convenience of fee-free, hassle-free direct bank transfers.

For businesses in these countries, the smart play is to provide card payment options exclusively for smaller invoices. This strategy can significantly reduce the days-to-payment ratio. Evidence suggests that customers are more inclined to promptly settle invoices when they can simply pay by card. For heftier invoices, encouraging direct bank transfers becomes the goal, as customers will shy away higher value quotes/deposits with hefty card processing fees.

By reserving card payments for smaller transactions and offering both card and bank transfer options for larger ones, businesses can enhance their cash flow and cater to their customers’ preference for avoiding processing fees on big-ticket items. This dual approach strikes an ideal balance, enhancing the financial health of the business while also respecting the customer’s wallet—a true win-win scenario.

In summary, while presets aim to simplify, they sometimes miss the mark by not accounting for the varied and nuanced needs of businesses across different regions. A one-size-fits-all approach often doesn’t cut it when local laws and financial habits come into play. A better approach would have been something much more user-configurable. In the meantime, most businesses will likely end up using either the ‘Always’ or ‘Never’ options.

The calculated fees are incomplete

There’s a curious hiccup with the new Card Payment fee setting in ServiceM8—it seems to have overlooked a small yet important detail. For reasons that aren’t quite clear, it doesn’t include the $0.30 transaction fee in the calculated fees. This oversight means you’re not passing the full fee cost onto the customer, shortchanging the process.

Now, for US businesses where a general service tax (GST) or value added tax (VAT) do not apply, this shortchange is flat across the board. However, for countries where GST or VAT does apply, the difference will compound as the value of the invoices increase. For example:

Australia (inc. 10% GST)

New Zealand (inc. 15% GST)

United States (no GST/VAT)

*There may be some inaccuracies caused by rounding differences used in the above examples

Is this a massive issue? It depends. It’s a minor snag, but for the perfectionists among us, those who yearn for precision in every transaction, it’s a splinter in the thumb. Until ServiceM8 addresses this, there’ll be a slight pang of disappointment each time. So here’s to hoping for a swift update to polish off this otherwise useful feature.

Conclusion

In conclusion, the ServiceM8 Card Payment fee option has been a significant development, sparking excitement at the time of its release. For WorkM8 Consulting and many others, it’s been a feature that’s been long-awaited, addressing a critical pain point in financial transactions. It fixes what was once a glaring gap with how Stripe integration was implemented into the platform.

This new feature, with its ‘set-and-forget’ nature and updated accounting integrations, represents a leap forward in operational efficiency. It demonstrates ServiceM8’s commitment to streamlining the financial aspects of service-based businesses. 

Yet, it’s not without its imperfections. The preset options, while designed to offer flexibility, are extremely limited in their implementation, and would have greatly benefited from being more user configurable. Furthermore, the oversight of the $0.30 transaction fee in the calculated charges, though minor, is flaw right out of the box and shows the need for continued refinement.