How to work out what a year of getting paid cost you
Short answer. Add up what your clients sent over twelve months, what actually reached you, and the bank fees and FX costs between the two. You get there by converting both figures to the same currency at the rates that applied on the day and taking the difference, then adding any charges your bank billed you separately. That total, expressed as a percentage of what you invoiced and as hours of your own time, is the number. This article is a procedure for producing it, not a recommendation about what to do next.
Why can't I just look this up?
Because no single party has the whole figure, and the largest component never appears as a line item.
Your bank knows what it charged you. Your client's bank knows what it charged them. Neither knows what the correspondent chain took. And the exchange-rate markup, meaning the difference between the rate you received and the mid-market rate, is usually the biggest piece. It is not a separate charge at all: it is embedded in the rate you were given, so it appears nowhere on any statement.
The most useful estimate of the full number comes from the gap between two figures you already have. Producing it is arithmetic, not investigation.
What do I need before I start?
For each international payment, create one row with three core figures. Twelve months of rows is the input.
- What was sent, in the sending currency, from your invoice or your client's remittance advice
- What arrived, in your currency, from your bank statement
- The date the payment was converted, so you can look up the rate that applied
Add a fourth column for any charge your bank billed you separately rather than deducting, if your statements show those. If you are unsure what the entries on your statement mean, that is a separate question worth settling first. Most do, usually as an inbound payment fee on the same day.
If you have fewer than twelve months, use what you have and annualise at the end. Three payments is enough for a rough figure and twelve is enough for a good one.
How do I calculate the cost of each payment?
Compare what arrived against what would have arrived at the mid-market rate on the day.
For each row, look up the mid-market exchange rate for the date, multiply the amount sent by that rate, and subtract what actually arrived. The result is an estimate of the payment's total cost relative to the mid-market benchmark, including FX spread and any deductions reflected in the amount you received. Expressed as a percentage, that is the estimated cost of that payment, measured against the mid-market benchmark.
Estimated payment cost % = 1 − (amount received ÷ (amount sent × mid-market rate))
Do this for every row. You now have a per-payment percentage, and the variation between rows is itself informative: a payment that cost twice the others may have taken a different route, incurred additional fees, or converted at a less favourable rate.
How do I turn that into an annual figure?
Sum the losses rather than averaging the percentages.
Averaging percentages weights a small payment the same as a large one. Add up the actual amounts lost, add the separately billed charges, and divide the total by what you invoiced across the year.
Worked through, for someone invoicing $3,000 a month across twelve payments:
| Amount | |
|---|---|
| Invoiced across the year | $36,000 |
| Estimated payment cost, at 1.55% | $558 |
| Inbound payment fees, $15 × 12 | $180 |
| Total cost of getting paid | $738 |
| As a share of income | 2.05% |
The percentage is what you compare year to year. The dollar figure is what tells you whether to act.
Is my number good or bad?
There is no universal benchmark for international payment costs, FX fees or exchange-rate markups, and be suspicious of anyone who offers you one.
What a payment costs depends on the corridor, the amount, the rail and the currencies. A figure that is unremarkable on one route is poor on another. Published comparisons tend to come from providers, who have an interest in where the line falls.
Two comparisons are more useful than any benchmark.
Against yourself. Run this again next year. If the percentage moved, something changed, and you will know to look for it. This is the comparison the whole exercise is actually for.
Against your own time. Divide the total by your hourly rate. At $60 an hour, $738 is about twelve hours of work a year spent covering the cost of being paid. At $40 an hour it is over eighteen. That converts an abstract percentage into something you have an intuition about.
What should I do about it?
That depends on the number, and one of the legitimate answers is nothing.
Before changing anything, work out what the change is worth. An hour spent on this costs you an hour of billable time. If the best available saving is $30 a year, you have already spent more than you will recover, and the correct move is to write the number down and get back to work.
If the figure is large enough to act on, these are the levers, in rough order of how much they usually move it:
- The payment rail. If your client can pay into an account local to them, the correspondent chain and the inbound fee both disappear. In the example above, that alone could take the total from $738 to under $300.
- The payment provider or route, once you have a per-payment percentage to compare against rather than a marketing page.
- Batching. If a fixed fee appears on every payment, fewer and larger payments pay it fewer times.
- The charge code, if payments arrive by wire and the deductions in the middle are material.
- Your rate. If the cost is structural and cannot be removed, it belongs in your pricing rather than in a surprise at the end of the year.
Notice that the first and last of those are not about payment providers at all. Most of the recoverable cost is usually in how the payment is routed and priced, not in which company processes it.
How long does this take, and how often?
About an hour the first time, and less afterwards, if you keep the record as you go.
The expensive part is reconstructing twelve months of history from statements. If you log four numbers when each payment lands, the annual version becomes a sum rather than an investigation. That habit costs about thirty seconds a month.
Once a year is enough for the full calculation. The number does not move quickly, and running it more often produces noise rather than insight. The exception is after you change something: if you switch rail, provider or terms, check the next three payments to confirm the change did what you expected.
What this method deliberately does not do
It does not tell you which payment provider or payment route to use.
Every version of this calculation published by a payment company arrives at the same conclusion, which is that you should use that company. The arithmetic in those pieces is often correct. The conclusion is not a finding, it is the reason the piece exists.
What you get from doing it yourself is a number that belongs to you, measured on your own corridor, at your own amounts, which is the only version that can tell you whether a change actually helped.
This article describes a calculation method. It is not financial advice and cannot account for your circumstances. The figures used are illustrative; the arithmetic is shown so you can substitute your own.