Not every business offers payment plans to their customers, but those that do end up experiencing significant benefits.
Payment plans are a crucial and effective business tactic. They offer flexibility for your customers and help your business build loyalty and stronger customer relationships.
When surveyed, about 30% of customers said that without a payment plan, they would not have made a big ticket purchase. By offering payment plans, you’re actually able to increase the revenue that your business is bringing in- even if it’s not all at once.
In this article, let’s go over the ins and outs of what a customer payment plan is, and how exactly you can begin to offer them to your clients.
What is a Customer Payment Plan?
A customer payment plan is an agreed upon division of a balance in several installments spread over a certain period of time. When offering expensive or big ticket products and services, it can be hard for customers to make payments all at once.
Customer payment plans allow the sum to be divided over several months or even several years. You can select and start and end date to the payment plan, dividing the sum into several installments spread out over that period of time. The terms and frequency of these payments don’t necessarily have to be uniform. Rather, you can decide what works best for you and your customers on a case-by-case basis.
How to Create a Customer Payment Plan
Creating a customer payment plan is actually quite simple! You will still create an invoice indicating the total amount due. However, the difference here is that you will separate different payments by different dates.
A payment plan should include each instalment, indicating the amount and date due. For example, Instalment 1 of $500.00 due on January 1st, and Instalment 2 of $250.00 due on March 1st.
Next, you need to ensure that the payment plan is approved by the customer. Every payment plan is individual to the customer. This means that you can work with your customers to create payment plans that work for both parties. Once the payment plan has been approved, the most efficient thing to do is set up automatic payments or automatic invoicing.
With automation, neither you or your customer need to worry about remembering dates or following up on upcoming invoices. In Quickbooks, this is as easy as a few simple steps:
Once you’re in the Sales section of your Quickbooks account, select Process Invoicing. Click on the pencil symbol in order to make edits, and select Create multiple partial invoices from a single estimate.
Once this is saved, you will be able to properly track multiple invoices and installments that are sent over time. This ensures that the many different invoices will all be kept organized and sent to your customers in the right order.
Why Offer Payment Plans to Your Customers?
In the past, offering payment plans seemed risky, unnecessary or too involved.
Nowadays, they are a stable of business that actually offer a lot of benefits to both parties. Here are the top benefits that you can reap from putting customer payment plans in place:
Benefit 1 - It Builds Customer Relationships
Offering flexibility to your customers helps them view your company more positively. Giving your customers different payment options allows them to value your company more highly.
When a customer feels stressed or out of control, it incites a more negative view of the company that they are paying.
Working with your customers rather than against them gives customers a better impression of you and increases the likelihood of them referring to a new business or coming back more often.
Benefit 2 - It Encourages More Revenue
Given the option to pay flexibly, customers are more likely to make large purchases and continue working with your company more in the future.
Although payment plans may not give you large chunks of revenue all at once, in the long run, they do help you make more money by being flexible.
Consistent cash flow is important, but losing customers by not offering flexible payment plans is not a smart business decision! It’s crucial to be realistic with customer payment plans while also understanding the long term benefits overall.
Benefit 3 - Customer Payment Plans Help You Avoid Non-Payment Issues
When customers can’t pay or have to pay late, it can force you to go to collections or even go to court. By giving them more options and being more realistic about payments, you can avoid many of these issues and allow customers to make payments on their own terms. This can not only ensure that your cash flow stays in the positive, but also that your business saves money on potential legal fees and court battles.
Let’s recap what we went over in this article:
- Payment plans are an agreement between you and your customers to pay in instalments over a period of time, rather than making a purchase all at once. They’re especially used for big ticket purchases and expensive items.
- Payment plans can offer many benefits to a business, such as increasing customer satisfaction and encouraging customers to make more purchases overall.
- To offer a payment plan, you must essentially extend your invoicing pay-by dates. This must be done by separating instalments and ensuring that the terms are agreed-upon before completing the transaction.
Use InvoiceSherpa today to help your business begin offering effective payment plans and build customer loyalty while also being efficient!