7 Hidden Fees that Could be Costing your Clinical Research Consulting Business up to 20% of Profits

Offering value that someone is willing to pay for is really hard.

Being profitable is even harder.

Part of boosting profitability is avoiding unnecessary expenses. One area where you can trim a lot of fat is actually related to each sale itself. This is reducing bank and transaction fees, which if left unchecked, could be costing you up to 20% of each sale. Losing 20% of each sale means that for every 5 sales, 1 is going entirely to pay fees.

If you can avoid unnecessary fees in your clinical research consulting business, you will make more money for yourself, or to invest back into the business.

Here are the areas where you may be getting drained by financial parasites.

• Freelance platform Service Fees
• Merchant Service Fees for Credit and Debit Transactions
• Merchant Service Fees for Bank Payments
• Wire Fees
• Cash Transaction Fees
• Exchange Fees
• Compounding Fees

Let's dive in.

Financial Parasites

The goal of payment processors and banking institutions is to take as much of your money as possible and give it to themselves.

They are financial parasites.

They don't kill the host, but feed continuously. Draining your revenues and fattening theirs.

Sometimes costs are a necessary part of doing business. With your clinical research consulting business, bank and transaction fees don't add any value. Just as a parasite adds no value to the host.

Below are a few ways that the financial parasites take a bite of your profits, and what you can do about it.

Freelance Platform Service Fees

Fees from freelance platforms can be really steep.

As high as 20%.

Yes, 20%!

Freelance platforms connect consultants—like you—and paying clients. They have built in functionality so consultants can search for jobs and clients can search for consultants or Freelancers. Examples include Upwork, fiverr, and the aptly named Freelancer.

This article will not argue whether or not these platforms are good for your business—they are likely not. The point is to make you aware of the high cost to your bottom line of using these platforms. Transactions through freelancing platforms have fees that range from 5 to 20%, though this does not take into account any subscription costs.

• Freelancer — 10% or 15% in the Preferred Freelancer Platform.
• peopleperhour — 20% when you start, eventually dropping to 3.5% after you reach lifetime billing thresholds per client.
• Upwork — 10% now that the sliding scale fee structure is being phased out.

Now that the fees from freelancer platforms are a bit clearer, you may leave too—or never start!

Merchant Service Fees for Credit and Debit Transactions

These fees likely affect you the most and are the easiest to remedy.

If you are not doing a direct transfer from your clients bank account to yours, then you may be using a 3rd party payment processor or merchant service.

Popular examples are Stripe, Square, and PayPal. These services do make it easy to accept payments online, but there is a hefty hidden cost. Typical transaction fees work out to about 2.9 to 3.4% for debit and credit card transactions.

• Stripe — 2.9% if your client pays through an online portal and 3.4% if you key in their credit card information.
• Square — 3.3% if your client pays through an online portal and 3.5% if you key in their credit card information.
• PayPal — 2.9% if your client pays through an online portal.

In addition to the popular examples above, if you use accounting software (such as Quickbooks or Xero) to send invoices, you are likely being charged transaction fees to process payments. Invoicing directly with software and having links to get paid is very convenient. However, these fees work out to be about 2 to 4% for credit transactions.

• Quickbooks — 2.99% if your client pays through an online portal and 3.5% if you key in their credit card information.
• Xero — 2 to 4% of the total invoice value. Works with Stripe.

One way to boost your profits by up to 4% is to stop accepting debit and credit payments online for your clinical research consulting business.

Merchant Service Fees for Bank Payments

These fees, though not as costly as accepting credit and debit transactions, are also easy to remedy if you so choose.

Transaction fees are a little bit lower for bank payments (such as ACH if you are in the US), and are ~1% of the invoice value. This is not as bad as 4%, but still drains your profits unnecessarily. The saving grace is that some 3rd parties will cap the ACH transaction fees that they collect per transaction.

• Stripe — 1.2%, $5 cap per transaction.
• Square — 1.0%, $1 minimum per transaction.
• Quickbooks — 1.0%, $10 cap per transaction.
• Xero — $2 cap per transaction.

Let's look at an example. With Quickbooks ACH payments, there is a $10 cap per transaction. If your transactions are $5,000 or more you'd pay 0.2% or less. So the larger your invoice amount, the less this financial parasite will bite your profits.

However, the fees can be different depending on your region.

For example, in Canada the situation with Quickbooks is far worse. The EFT transaction fee cap is $100 per transaction, 10x that of the cap in the US. So you would have to invoice $50,000 per transaction to get the fee down to 0.2%. Be sure to check your region specific pricing.

If your clinical research consulting business issues high value invoices, then bank payment transaction fees from merchant services may not be much of an issue if the fee percentage is less than 0.5%.

Wire Fees

If you have ever accepted wire transfers online, and wondered why the received amount is less than the invoiced amount, the answer is wire fees.

Wire transfers make it easy to send and receive money (especially internationally), but the fees can be high, depending on how much you invoice.

This is because wire fees are generally a flat fee ($25 - $50 depending on your banking institution). At a flat fee of $25 receiving a wire of $500 would cost 5% and a wire of $5,000 would cost 0.5%.

Wire transfers can also be a pain for your clients to send, because they may also incur a wire fee on their end of $25-50 (again depending on the banking institution).

Some business may even ask you to split or completely cover their wire fee to pay you—in addition to yours—which can drain your profits even more.

Another hidden cost can occur if the wire transfer doesn't go direct from your client's bank to yours, but hops through an intermediary bank.

This intermediary bank also takes a bite out of transferred funds (which again can be $25-50 depending on the banking institution). This can be common for international wire transfers.

With 3 bites: one fee to send the wire, one for the intermediary bank, and one from your bank, you could be drained by $150 from the financial parasites.

Cash Transaction Fees

If you deal with local clients, you may be tempted to accept cash. The financial parasites can get you here too.

When you deposit cash into your business bank account there can be a fee of ~$5 per $1000 deposited, but each banking institution will be different.

This parasite has more bite if you deposit lower amounts of cash.

For example, depositing $100 dollars, cost $5 dollars or 5%. However, the percentage lost is lower if you deposit exactly $1,000. Depositing $1,000 costs the same as depositing $100 ($5), but the percentage is far lower at 0.5%.

If you deposit cash, it may be better to deposit large amounts less frequently to save on the transaction fees.

Exchange Fees

The last fees where the financial parasites can drain you are exchange fees.

If you receive currency that is not the same currency in your bank account, your bank will charge a fee to exchange the currency to the one in your account.

Banking institutions do a good job of hiding this one, you may not even know that you are paying it. Here is how it works.

Imagine you are a business in the US and send an invoice to a business in the UK. To make it easy for them, you invoice in GBP for a total of £5,000. However, your chequing account is USD. If you check the market exchange rate, you may see that 1 GBP = 1.25 USD. Therefore when you deposit the GBP you would be expecting 5,000 * 1.25 or $6,250 USD to end up in your account after the currency is exchanged.

What the bank does, is give you a lower exchange rate and pockets the difference. For example, they may give you an exchange rate or 1.20. You would then receive 5,000 * 1.20 or $6,000 USD in your account. The fee in this case is $250 or 5%! Financial parasite strikes again.

The same thing can happen if you have accounts with a banking institution that have difference currencies and transfer funds between them. For example, if you want to transfer from your USD checking account to your CAD checking account, the banking institution may take a 5% on the exchange rate as a fee when transferring and exchanging the funds.

If you can avoid a lot of currency exchanges, you can avoid the parasites and boost profits by up to 5%.

When it is not possible to avoid a lot of currency exchanges, you can save a lot of money by getting a better exchange rate with an international service provider. They will still charge a fee, but a much lower fee.

Compounding Fees

A worst case for your profits is when fees compound.

You can pay fees on top of fees.

You could pay the wire fees for your client, then the intermediary bank fee, then a wire fee from your bank, and then exchange fees from your bank.

Multiple parasites leading to more financial drain.

Be wary of cases where your fees could compound and you can boost your profits.

Summary

This article has outlined a few hidden places were financial parasites can drain your profits. By avoiding all or some of these fees you can boost your profits by up to 20%. Save your money!

If you found this useful, please let me know! If you have other tips to avoid financial parasites I'd love to hear from you. Get in touch!