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Should You Offer Payment Plans to Customers?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedFeb 20232 min read

When a customer is hesitant to make a big purchase, offering an instalment payment plan might be the deciding factor. They can increase revenue and improve cash flow – but setting up customer payment plans can be a daunting prospect for small businesses. So, should you offer a payment plan to customers? We’ll discuss the benefits and logistics below.

What are customer payment plans?

A customer payment plan describes an agreement between the business and customer. It allows the customer to break down a larger purchase into smaller instalment payments over time. This might be used in advance to buy a big-ticket product or service. Customer payment plans can also be put into place after the purchase has concluded, when a buyer is having difficulty paying a large invoice.

Can I offer my customers a payment plan?

Yes, and there are distinct advantages to offering customers a payment plan. While in the past it may have been a hassle to set up and collect instalment payments, tools like automated invoicing software and buy now pay later (BNPL) services make it far easier to put in place.

There are numerous reasons to consider offering payment plans to your customers.

They strengthen the business-customer relationship by giving flexible payment options with an element of trust.
They increase revenue by encouraging customers to make more expensive, big-ticket and luxury purchases they wouldn’t be able to afford with a single lump payment.
They improve cash flow by ensuring a steady stream of small instalment payments over time, for predictable income.
They reduce missed or failed payments. If a customer is having difficulty paying their bills, working with them to create a payment plan helps prevent a costly, time-consuming collections process.

How to offer payment plans to customers

If the benefits outlined above make sense for your business, the next step is determining how to offer payment plans to customers. Specifics will vary depending on your industry, products, and business size. To get started, you’ll need to draw up the payment plan:

Number of instalments
Instalment due dates
Instalment amounts
Terms and conditions

You can find a customer payment plan template in most accounting software. A standard invoice template will also work. Fill out the invoice with the services rendered and total amount due. For payment, list each instalment alongside its amount and due date.

It’s important to communicate with the customer to make sure the payment plan works for them. Once the plan is approved, consider setting up automatic invoicing to collect payments as they’re due. Alternately, agree upon a payment method and send email reminders to the customer as each instalment is due.

What are BNPL payment plans?

The buy now pay later (BNPL) payment method is an increasingly popular way for customers to pay for their purchases in a series of instalments. Using a BNPL service like Klarna or Afterpay takes the guesswork out of creating customer payment plans, because these payments are handled by a third-party provider instead.

If you don’t want to deal with instalment payment plans yourself, BNPL providers set up the agreements, collect payments, and handle late or missing payments instead. GoCardless integrates with BNPL providers like Klarna, leveraging Direct Debit to collect payment instalments directly from customer bank accounts. This ensures a quick and easy set-up for the customer and business alike.

The bottom line

Whether you opt for a BNPL provider or use your own customer payment plan template, it’s rarely a bad idea to give your customers more flexibility. This type of instalment agreement can increase customer satisfaction and goodwill, encouraging your customers to make more purchases over time. Just be clear about all payment terms and conditions to avoid confusion, and you’ll benefit from steady cash flow.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. It's easy to collect recurring payments from your customers - simply set up a mandate with them, and you both enjoy flexible, safe payment collection. It's perfect for offering your customers instalment payments, without needing to use an additional third party provider.

Find out how GoCardless can help you with one-off or recurring payments.