I am a freelancer and have always just sent my customers Paypal invoices, but lately everyone wants to pay with a credit card. I also have trouble keeping track of who owes me what.
I am going to tackle the second part of the questions first.
Sending invoices and tracking payments
I used to do this very old school. I made an invoice myself in InDesign (you might use Word or a similar program) and emailed it to the client. The could send me a check or, if they requested it, I would send them an invoice through Paypal. Then I had a spreadsheet where I kept track of due dates. This was fine when I just had a handful of clients, but as my business grew, it just became impossible and too stressful to keep up with.
My number 1 piece of advice is to use a professional invoicing system. Google “invoicing for freelancers” and you will see that there are a lot of options, with a lot of different pricetags (some are even free). I kicked the tires on a bunch of them (and I recommend you do, too) but the one I fell in love with was Freshbooks. It was designed specifically for freelancers, lets you input all of your clients, sends nice invoices by email, accepts payments by several different methods, and keeps track of when payments are late, sending out periodic reminders. It costs about $30 per month, but it more than makes up for that in saved time and speedy payments.
When you look at different programs, make sure you look to see what payment methods they can accept – many will only accept Paypal, and some don’t offer any kind of payment processing at all – they just create invoices.
Accepting Credit Cards
People CAN pay with a credit card through Paypal, but it always defaults to them using their account and has all kind of links trying to get people who don’t have an account to sign up for one. This can be a turn off.
Up until recently I was offering Paypal and Google Checkout. Google Checkout has the advantage over Paypal of being pretty straightforward credit card processing, however unlike Paypal, they REQUIRE people to sign up for an account to pay. It is also pretty buggy.
Then I found out that Freshbooks integrates with Stripe! Stripe is, I have to say, awesome. You cannot use it to send invoices by itself, but used with a system like Freshbooks, it is just about perfect. It’s free to sign up, no monthly fees, and the transaction fees are identical to Paypal’s. But your clients don’t have to sign up for any accounts—they never even leave your invoice system. They just enter their credit card info and BAM! Secure credit card processing made really really easy. 7 days later, the funds show up in your bank account, like magic.
I also still offer Paypal, and people can still mail me a check – the more options you can provide, the better.