Instalment payments refer to a customer paying a bill in small portions throughout a fixed period of time.
Instalment payments are a payment plan arranged between the buyer and the seller. It’s usually clearly stated in the payment terms in a contract or on an invoice. These payments are generally arranged for a large order.
The different types of instalments
The term ‘instalment’ refers to anything paid in smaller batches over a period of time. This may include:
Instalment sale between a buyer and seller: For instance, purchasing a car with monthly instalments. The agreement is between the car dealership and the car purchaser.
Instalment loans: For instance, you receive a mortgage loan from a bank and pay it back in instalments. The payments are towards a loan and usually incur interest.
Instalment debt: For instance, paying off your tax bill, or someone who gave you money. Any debt that is repaid in instalments.
The advantages of instalment payments
Instalment payments can benefit both the buyer and the seller.
Some benefits for the customer include:
Keeping track of your finances
Stretching the cost of a purchase over a period of time
Keeping to your budget
Low monthly payments
Some benefits for the business are:
Allows more flexibility for your customers
Will bring in more sales
Regulates cash flow
Recording instalment payments on invoicing software
Invoicing software is a great way to keep track of your instalment payments and make sure your customers pay on time. Instalment payments can be recorded either by partial payments on a single invoice, or recurring invoices for each instalment.
Partial payments
First, you’ll need to create the invoice for the client, and clearly state the payment terms and instalment periods on the invoice. With SumUp Invoices, you can create a compliant invoice in under a minute and send it to the customer’s email.
When it comes time for the customer to pay the first instalment, you’ll add a partial payment to the invoice from your invoicing software. The invoice will automatically update to show that it is partially paid, and the amount remaining.
You can do this for every payment until the invoice is paid in full.
Recurring invoices
Rather than entering partial payments on a single invoice, you can set up recurring invoices for each instalment amount. It would be beneficial to have a payment contract signed by the customer explaining the payment plan.
You can choose to have the recurring invoices created and sent automatically with invoicing software or have them created but sent manually by you.
