Merchant of Record vs Invoicing Tools

Picture payments landing within days, no forms, no follow-ups.

Two tools can make that happen: Merchant of Record and Invoicing Tools. 

This guide weighs the two, so you can choose the route that boosts independence and cuts admin.

What exactly is a Merchant of Record (MoR)?

Merchant of Record services:

• Acts as a legal seller: You skip registration stress.
• Files taxes: No 3 AM form panic.
• Follows global rules: You stay compliant anywhere.
• Sends payouts on schedule: Money lands faster.

A Merchant of Record (MoR) is a third-party payment infrastructure that legally sells your service to your customers.

The MoR buys the service from you, then resells it to your customer. This setup allows them to manage a whole range of financial processes, from VAT (Value Added Tax) to chargebacks.

If this is your first time hearing about MoRs, you might recognize the most popular Merchant of Record platforms: Ruul, Paddle, Dodo Payments, Gumroad, and Lemon Squeezy.

Merchant of Record services in detail

People often confuse a Merchant of Record (MoR) with a Payment Processor or an Invoicing Tool. But to make the right choice, you need to understand the differences:

• A payment processor prioritises secure transactions when accepting payments from your customers.
• An invoicing tool is for issuing professional invoices to your customers.

An MoR does both of these things and takes on several other critical roles:

• It accepts payments from your customers. You can use various payment methods, including credit cards, bank transfers, e-wallets, and crypto. Plus, it manages relationships with payment networks.
• It issues and sends legally compliant, localized invoices to your customers. Two invoices are created. One is for your business and the MoR, while the other is for the MoR and the end customer.
• It automatically calculates, collects, declares, and pays sales taxes like VAT and GST to the relevant tax authorities.
• It uses cutting-edge systems and AI tools to cut down fraud risk in transactions. It also blocks any suspicious activities right away.
• It takes care of customer disputes and chargeback issues for you. It collects the needed evidence and settles disagreements. This reduces your stress and saves you time during your work.

Here is a dashboard screen from Ruul so you can see how it works:

Does an MoR free you from the hassle of hiring an accountant?

Yes, in most cases, it does! 

It all depends on what you’re selling, where you’re selling it, who your customers are, and your business setup.

A Merchant of Record (MoR) handles a lot on your behalf:

• It collects payments from customers.
• It calculates taxes (like VAT, sales tax, GST, etc.).
• It issues invoices.
• It ensures compliance.
• And if needed, it manages refunds and chargeback processes.

This means you don't have to deal with:

• VAT rates, tax declarations, or issuing invoices for each customer.
• If you sell abroad, you have to deal with different tax and e-invoicing systems. Each country has unique rules, so you must adapt to them. Doing this keeps you compliant and helps transactions run smoothly.

Using an MoR cuts down the areas where you usually need an accountant.

But does it cut the need for one entirely?

No:

• An MoR doesn't declare your income tax or withholding tax in your home country. That's still your responsibility.
• If you own a company, you may still need an accountant. They handle annual declarations, manage bank accounts, and keep track of expenses.

When should you choose a Merchant of Record?

There are a few situations where I'd definitely tell you to choose an MoR:

1. To work globally

Customers can come from anywhere in the world. If you don't want to limit yourself to local clients, you should definitely go with an MoR.

This way, you won't have to worry about calculating VAT for each country. You can stop tracking tax laws and scrambling to remain compliant.

What's more, it helps you 

• avoid tax penalties and 
• allows you to offer local payment methods to your customers. 

Hear what Gizem, a Ruul user, says: 

“When I moved to France, I also relocated my company to this country. Then, I had to handle a lot of international transactions. That's when I started working with Ruul. Now, I can work with any country. I don't have to limit my clients to certain payment methods, and they love it.””

2. To offer subscription-based services

MoRs let you sell almost any software, product, app, or service as a subscription. If you're aiming to make one of your offerings a subscription for regular income, an MoR is key.

Let's say you're a freelancer. Your client frequently orders services from you. They might ask for 10 Instagram posts a month, 8 blog posts each month, or other similar services.

With MoR platforms, you can easily turn this recurring service into a package. You can turn the package into a subscription plan. This automates the whole process.

Think of your MoR saying:

“I'll take care of the boring stuff. Subscriptions, collections, failed payments. Just keep doing your thing.”

• manages the subscription for you, 
• handles automatic collections, and 
• even simplifies dunning (failed payment recovery) processes.

3. For high sales volume

More sales mean more responsibility. If you're managing just one or two clients, that's fine. But how are you going to handle 10 clients individually? 

Invoicing each one, requesting payments, and then following up.

That feels incredibly clunky in 2025, right?

If you don't manage this yourself, you'll need to hire an accountant or an assistant. That's far more expensive than working with an MoR.

Freelancers with high sales volume should switch to an MoR to save time and money.

4. For starting fresh

The way you start your business often sets the tone for how it continues. When you're just beginning, try to stick to the principle of "don't complicate, simplify."

Diving into taxes and laws from the start can wear you out. It makes it hard to focus on your main tasks.

If I were a new freelancer, I wouldn't want to deal with invoices and VAT on top of all the other complexities. A scalable MoR for my growing business, so I can focus on finding clients and completing projects.

That's why an MoR is a great starting point to keep you from stumbling in the initial stages. 

This way, early in your career, you'll focus on "How do I find my first client?" rather than "How do I issue an invoice?"

This is truly the kind of mindset every freelancer should have.

What exactly is an invoicing tool?

Invoicing tool, in short:

• Generates PDF bills: You still send them.
• Sets due-date alerts: You do the follow-ups.
• Leaves taxes to you: Extra paperwork hours.
• Lets clients delay: Cash flow stays shaky.

As the name suggests, an invoicing tool is primarily used for creating invoices. 

It also helps you 

• track time, 
• generate income and expense reports, and 
• generally look more professional as a business.

The key difference between this method and an MoR is that you can tailor your invoices with invoicing tools.

While an MoR serves as an invoicing tool, an invoicing tool cannot serve as an MoR.

The reason is simple:

An MoR can issue invoices just like an invoicing tool. Invoicing tools lack the full legal and tax compliance, fraud prevention, and international payment management features that a MoR offers.

Are invoicing tools enough on their own?

Using invoicing tools to issue invoices is a crucial step for your business. But they aren't enough on their own. That's because these tools don't take on the legal and tax responsibilities that an MoR does.

You can either use an invoicing tool and handle many tasks yourself, or you can use an MoR and pass on those responsibilities.

If you’re starting as a freelancer, getting wrapped up in complicated invoicing can distract you from the key job: landing your first client.

When should you use an invoicing tool?

You can use an invoicing tool in these situations:

1. You only have local clients

If you only work with local clients, you don't need to worry about VAT rates in different countries. In this case, an invoicing tool isn't a bad idea. It'll be easier to follow your country's laws and manage taxes accordingly.

2. You can manage tax and legal processes yourself

If you're already an expert in tax laws, then an invoicing tool can work for you. However, you'll have to do most things manually, so ask yourself if you have enough time and money for that.

3. You want to issue customized invoices

If you want to give off more of a business vibe than just a solo freelancer, customized invoices are a good idea. They also help with your branding. Unlike invoices from an MoR, you'll have more customization options for your own invoices.

Critical differences: What MoRs do that invoicing tools don't

A Merchant of Record (MoR) takes on many more tasks than invoicing tools do. Especially for those aiming to go global, an MoR offers a secure and fast way to sell services in different countries.

This positions the MoR as more than just a simple financial tool. It's like an "e-commerce ecosystem manager."

To help you better understand the difference, I'll highlight some key points you'll find with an MoR, but not with invoicing tools:

1. Tax calculation and global compliance

Global compliance is the first thing invoicing tools don't handle.

Tax rates vary in every country, and they're constantly changing. Keeping track of all of them yourself is almost impossible. But MoR platforms exist to solve this problem.

An MoR automatically calculates the taxes for each country and collects them from your customer. Then, it declares and pays those taxes to the local tax authorities. You stay legally compliant without lifting a finger.

2. Multiple currency and payment method support

Customers are particular about payments. If you send them an unfamiliar payment link, they'll likely avoid paying. That's why you need to offer a localized payment screen where they can pay in their own currency.

MoRs typically earn this trust by allowing local credit cards, bank transfers, and e-wallets. When customers don't encounter a foreign payment screen, their trust increases, making them more likely to continue working with you.

At Ruul, we've pushed the boundaries further. We offer Binance integration, allowing you to accept payments with USDC. Freelancers love this, as these payments hit their accounts at lightning speed.

3. Fraud prevention and chargeback management

A chargeback happens when a customer disputes a transaction through their bank. These often succeed, making chargebacks an easy target for fraud.

For example, bad actors might get a credit card, buy a random product, then request a refund through their bank. Their goal is to turn the credit limit into cash.

As chargebacks increase, your payment provider might flag you as a low-reliability seller. They could even freeze your account. So, as a seller, you need to fight to reduce chargeback risk.

But MoRs handle this fight for you.

MoRs use AI-powered detection tools to prevent fraud. They spot suspicious transactions. Their support team quickly blocks these. If you get into trouble, they gather evidence and defend you.

This is a unique advantage MoRs offer to protect your money and time. Invoicing tools simply don't provide this level of fraud or chargeback protection.

4. Subscription management and automated collections

I've mentioned this before, but it's another thing you can't do with just an invoicing tool.

MoRs automate the entire subscription lifecycle.

This includes recurring payments, plan changes (upgrades/downgrades), cancellations, and even handling failed payments (dunning management). And completely removes the need for manual tracking and ensures your income stream is continuous.

Invoicing tools usually don't offer such comprehensive subscription management. You'd have to manage these processes manually or by using additional software.

5. Customer support and communication responsibility

An MoR provides support to your customers for any payment-related questions or issues. This means your customers won't ask you for help with payments; instead, they'll contact the MoR, who is the legal seller.

This saves you time and cuts down on customer service costs.

However, an invoicing tool doesn't do this. Since you're acting as the legal seller, you'll have to take on all communication responsibilities related to payments yourself.

6. Easy and fast access to global markets

An MoR removes the burden of setting up local bank accounts in every market you enter. Since the MoR makes the sale, you don't need your own local account. This gives you more courage and motivation to enter new markets.

The MoR's integrated approach dramatically reduces your operational workload. It presents you to your clients more professionally, helping you build a traceable, scalable, and professional freelance career.

In contrast, invoicing tools offer no features to help you sell globally.

Which one is more affordable?

So far, we've talked about what the Merchant of Record and invoicing tools offer. One of our most important comparison points, of course, is cost.

Given all that an MoR does, you might be thinking it charges higher fees. But that's usually not true. You will find affordable Merchant of Record options.

Let's do a quick calculation.

MoRs generally charge a fee of 5% to 10% per transaction. For instance, at Ruul, this rate is a fixed 5%, and everything is included in that fee.

Invoicing tools, on the other hand, typically require a monthly subscription plan. These plans can start from a minimum of $10 and go up to $100 per month.

This means that with MoR platforms, you're looking at a pay-as-you-go model. If you don't earn money, you don't pay commission. But with invoicing tools, you're stuck with a monthly payment even if you're not making any money.

However, the real key here is the "total cost of ownership."

Remember what we said earlier? An invoicing tool only creates invoices for you. An MoR does much more.

Here are some of the cost savings that an MoR offers, even though it might seem more expensive at first glance:

1. Legal consulting costs

You'll need legal advice to comply with regulations like GDPR and PCI DSS.

An MoR is an expert at ensuring compliance with these legal regulations, so you won't need to spend extra money on them.

2. Losses from fraud

If you use an invoicing tool, you'll need to integrate software to prevent chargeback risks, and that's an added cost. Plus, there's always a chance you could lose money if a chargeback goes through.

However, an MoR includes built-in fraud detection software, saving you that expense. It also gathers evidence and disputes chargebacks itself. So, you won't pay for extra software, nor will you lose money due to chargebacks.

It's a complete win-win.

3. Multiple payment gateway integration

Let's say you want to integrate local payment methods specific to customers in different countries. If you do this with an invoicing tool, you'll have to set up agreements with multiple payment gateways and cover the resulting costs.

However, MoRs come with local payment integrations for the countries they support. This means you don't have to do anything extra when a new customer comes from a different country.

In short, if you don't use an MoR, you're open to potential risks and you'll bear the costs. MoR platforms are absolutely worth the price, and when you look at the total cost of ownership, they almost always save you money.

MoR vs. Invoicing Tool: Impact on sales and marketing

Both a Merchant of Record (MoR) and an invoicing tool can affect your sales and marketing performance.

MoR: Makes selling easier, sometimes even sells for you

An MoR has a big impact on sales and marketing. It's not just about taking payments. It's about offering a safe and smooth experience in a larger market.

• Thanks to the MoR's infrastructure, customers have a professional and trustworthy payment experience. This makes them feel like, "Okay, I can buy this with peace of mind."
• MoR systems handle invoicing, tax calculation, and collections for you. This frees you from operational tasks. So, you can focus more on getting new customers.
• Some MoRs (like Ruul 👋) also help with marketing. For example, they offer features like portfolio creation. This makes it easier to convince customers.
• If you want to reach more customers in international markets, an MoR offers local payment methods. You can market in any country you want without hesitation.

Invoicing Tool: Necessary, but no magic wand

Invoicing tools are great; they bring order. But they don't really change the game for sales and marketing like an MoR does.

• Sure, you can add your logo and company name. That's important for looking like a professional brand. But by itself, it has weak "persuasion" power.
• The biggest drawback: everything is manual. Creating a separate invoice for each client, tracking payments, sending reminder emails... by the time you're done, the day is over. This buries you in "task management" rather than "client acquisition."
• Then there are payment delays, of course. You send your invoice, but payment doesn't come right away. Sometimes, it doesn't come at all 🙃 This shakes your income balance, dries up your marketing budget, and stresses you out.

Scalability: Growing from solo freelancer to a serious business

Freelancing isn't a typical 9-to-5 job. Your client load and income will go up and down.

As you gain more experience, you'll need to earn more money and attract more clients to improve your quality of life.

For this to happen, you need to build a scalable business model that can easily grow when the time comes.

Let's compare MoR and invoicing tools from this perspective:

MoR: An infrastructure ready for growth

With an MoR, you can aim for more clients, more countries, and more income. It offers greater scalability when you want to grow your business.

Let's take Ruul as an example: It supports 190 countries and 140 currencies.

This means you have 190 different opportunities and countless customer types you can target anytime.

Trying to reach such a vast market with an invoicing tool would create a huge time drain and cost burden.

Instead, with an MoR, you can expand into any market you want, easily onboard customers into the system, and track all your invoices from a single place.

Invoicing tools are efficient for small-scale

Invoicing tools usually only support a few currencies and limited payment methods. So, they're good when you're only selling to local clients. 

Plus, if your business volume is small and you don't have many invoices to manage, an invoicing tool won't be a burden.

However, since these tools are limited to just a few currencies, expanding into a new market will create extra costs and time demands. You might even need to hire an accountant and an assistant to get the flexibility an MoR offers.

Merchant of Record platforms for freelancers

1. Ruul

In 2025, Ruul is one of the top MoR platforms for freelancers.

It helps you sell digital products, services, or software—whether it's fixed-price or subscription-based. From a single platform, you can sell your services to 190 countries, issue invoices, receive payments, and operate with global tax compliance.

Beyond just being an invoicing and MoR platform, Ruul offers an environment where you can combine your portfolio with sales. This transforms your portfolio from a passive element into a tool that actively attracts clients to you. It doesn’t matter if you’re looking for a Merchant of Record for SaaS or ecommerce, or a freelance service. 

Here are some other features Ruul offers:

• Payment reminders: Put an end to late payments.
• Early payout: Get paid for an unfinished project.
• Portfolio creation: Showcase your portfolio and storefront in one place.
• Service packages: Sell ready-to-go, fixed-price service packages.
• Subscription management: Offer subscription-based products, services, and software.

Pricing: It's pay-as-you-go, with a fixed 5% commission. No monthly subscription fees and absolutely no hidden charges!

2. Paddle

Paddle is another MoR platform that focuses on digital products and subscription-based software/applications. It collects subscription fees for you, recovers failed payment attempts, and uses software to prevent your business from incurring losses.

Pricing: 5% + 50 cents per transaction. No subscription plan.

3. Lemon Squeezy

Lemon Squeezy handles the legal sale of your digital products and subscription software for you. It lets you sell your products individually or in collections. Plus, it helps you test your performance with comprehensive reporting.

Additionally, just like the others, Lemon Squeezy comes with integrated software that helps reduce failed payment attempts and prevent fraud.

Pricing: Lemon Squeezy charges 5% + $0.50 per transaction

4. Gumroad

Gumroad is often one of the first names that comes to mind for digital products.

It's a popular MoR for freelancers, content creators, and influencers. You'll typically find e-courses, e-books, and graphic design materials there. Creators can even collect tips from their fans.

Pricing: It's 10% + $0.50 per transaction, which is among the higher fees.

Invoicing Tools for freelancers

1. Invoice Ninja

Invoice Ninja offers unlimited invoicing for up to 5 clients on its free plan. You can customize your invoices with your logo, company details, and choose from 4 free templates.

If you have the Pro or Enterprise plan, you can even get profit and loss reports for custom timeframes.

Pricing: Plans start from $10 per month.

2. FreshBooks

FreshBooks creates professional invoices and helps you track your business's income and expenses. It really stands out for its accounting features, offering double-entry accounting tools and financial reporting for real-time tracking.

Pricing: Plans start from $8.40 per month. A 30-day free trial is available.

3. Square Invoices

Square Invoices allows for one-time or recurring invoices. Customers can pay quickly using methods like credit cards or mobile payments. It also differentiates itself with website creation, automatic reminder sending, and financial tracking features.

Pricing: Plans start from $49 per month.

4. Copilot

Beyond just invoicing, Copilot offers comprehensive features like a client portal, e-signature collection, knowledge base creation, and client relationship management (CRM). It comes with additional tools like file sharing, messaging, and contracts.

Pricing: Plans start from $39 per month.

5. Harvest

Harvest excels particularly in time tracking and project management. It works simply: you start a timer when you begin working and stop it when you finish. Its synchronization with apps like Slack, Trello, and Chrome also simplifies things.

Pricing: Plans start from $11 per month. It includes a very limited free plan.

6. Zoho Invoice

Zoho Invoice offers multiple invoice templates and flexible customization options. It has features like payment reminders, time tracking, and a client portal. Its usage and interface are quite clean and simple, making it ideal for freelancers, entrepreneurs, agencies, and consultants.

Pricing: Plans start from $29 per month.

How does Ruul simplify payments for you?

Ruul makes payments easier for freelancers because it's a full-service Merchant of Record (MoR).

With support for 190 countries and 140 currencies, it provides a complete set of tools for you to work globally. Ruul automatically calculates VAT, issues invoices, collects payments from clients, and pays you however you prefer.

Here's how Ruul helps:

• Crypto payment option: Get USDC instantly with Binance integration.
• Early payout advantage: Receive payment for unfinished projects early from Ruul.
• Automated invoicing: Stop manually invoicing for recurring services.
• Easy payment via link: Your client can pay securely without signing up for Ruul.
• Pay-as-you-go: A fixed 5% fee—you can pay it, or your client can.

We've successfully completed over 140,000 transactions on Ruul and achieved 98% customer satisfaction. Try Ruul for free and see how simple freelancing can really be!

FAQs

1. What is the difference between a merchant of record and a payment gateway?

A Merchant of Record (MoR) takes legal liability for transactions, handling taxes and compliance. A payment gateway simply processes the technical routing of funds, connecting your customer to the payment network.

2. What is a Merchant of Record?

A Merchant of Record (MoR) is a legal entity that resells your service, taking on all financial and legal responsibilities like taxes, compliance, and chargebacks. It simplifies global sales.

3. What is the difference between a merchant and a payment provider?

A merchant is the business selling the product or service. A payment provider (like a payment processor or gateway) offers the technical means to accept payments, but the merchant retains legal liability.

4. What is the difference between a payment facilitator and a merchant of record?

A Payment Facilitator (PayFac) simplifies payment processing for sub-merchants under their own merchant account. A Merchant of Record (MoR) goes further, taking full legal and financial responsibility for the sale itself, including tax and compliance.