a person in a blue shirt looking at paperwork with a calendar and a pen writing a check.

Payment plans and installment plan options for your small business

Debit cards, credit cards, cash, money orders, checks, instant deposit, and online payments—these are just some of the payment options available at checkout today. However, as digital commerce continues to evolve, so do payment options. One payment option that’s becoming increasingly popular today is a payment plan.

As a business owner, offering payment plans may sound risky, especially if you’re concerned that a customer may be unable to meet their payments. In this post, we’ll go over payment plans and installment plans, explain how to accept partial payments, discuss the benefits of installment plans, and more.

Payment plans vs. installment plans

Payment plans and installment plans both allow customers to pay off their balance over time. However, payment plans offer the customer flexibility when choosing the payment amounts and the payoff date. Installment plans are preset, which means the payments and payoff dates are predetermined.

What are payment and installment plans?

Payment and installment plans are not synonymous, although they have similarities.

a chart explaining the differences between payment plans and installment plans

Understanding payment plans

Payment plans allow customers and cardholders to make partial payments over time until they pay off the full amount. Here are the details:

  • Typically, there is a minimum payment amount owed each week or month, but customers are free to choose how much they pay as long as they satisfy the minimum.
  • Payment plans don’t usually have set deadlines. Customers are free to choose the payment amounts and also control the payoff date. This is comparable to paying off the balance on a credit card

Payment plan example

Think of your business credit card. You are given a set limit but you’re free to use as much of that credit as you choose. You also have the freedom to choose how much of your balance to pay off each month, as long as you meet the minimum requirement

This is an example of a variable payment plan. It has no cutoff date and no penalty for early payment. 

Understanding installment plans

Installment plans also allow partial payments over time but are less flexible and usually more favorable to business owners due to their setup. Here are the details: 

  • Installment plans divide the total amount into equal installments, usually between 4 and 12.
  • There is a flat rate per payment the customer needs to meet to avoid fees.
  • The customer also needs to make payments on set deadlines to avoid fees. 

There are many benefits of payment and installment plans, such as allowing customers to pay for what they can afford at the moment and improving your cash flow by accepting a partial payment upfront.

Installment plan example

If you need to purchase office equipment like desk chairs, some businesses will look to rent-to-own stores to make the purchase. Here, you will select your purchase and they will split the price (plus taxes and fees) over a set period. 

This is an example of an installment plan. You will get a predetermined payoff date and set rates for each installment.

Benefits of using installment & payment plans

Partial payments have many useful benefits for both retailers and their customers. With more payment options, customers have more buying power, which can boost sales. Here are some of the reasons why retailers should consider using installment plans:

  • Increases sales
  • Enhances customer loyalty
  • Attracts new customers
  • Improves cash flow

Increase sales

One of the top benefits of accepting partial payments is that it can help boost sales. Partial payments give buyers more flexibility to make regular payments for an expensive purchase, such as furniture or a new appliance. 

When trying to close a sale on a costly item, the sticker price can make customers second-guess their purchase. By introducing your payment plans at the beginning of the sale, customers might be more inclined to follow through.

Enhance customer loyalty

When customers have more payment options, it can help increase the return rate. Knowing they have multiple payment options, including installment plans, customers may return for future purchases. This can help build brand and customer loyalty and give you a competitive advantage over other businesses that don’t offer those payment options. 

Attract new customers

Depending on the items or services you sell, finding new customers can be challenging—especially when what you sell is expensive. Offering payment plans can make your products and services affordable to more customers. With a broader pool of customers, you can increase your revenue. 

Improve cash flow

With payment plans, you can have a more stable and consistent cash flow, so your business can operate smoothly. Additionally, third-party vendors can help you manage cash flow and calculate key metrics, like your accounts receivable turnover ratio. Then, when you set up recurring payments, you can easily collect them to keep your cash flow in good standing. 

Drawbacks of using installment & payment plans

Though there are benefits to using installment plans, there are some drawbacks as well. Here are some things to consider before implementing partial payment plans: 

  • Higher fees: Partial payment plans typically charge customer and merchant fees and can be much higher than traditional payment methods. 
  • Integration issues: Fully integrating installment plan methods into your normal online checkout process can be time consuming and expensive.
  • Qualification challenges: Some businesses may not be able to implement installment payment plans if they don’t meet the requirements to qualify for this payment method. 
  • Consumer debt: Payment plans can encourage customers to purchase something they can’t afford, which can lead to financial troubles and a hit to their credit score if they’re not able to make payments on time. 

How to offer payment plans

4 steps to offering payments plans with various payment-related icons.

There are a number of ways to optimize your offering of partial payments to customers. Depending on the software you use for payment, you may already possess the option to offer this benefit. If this isn’t already in place, you should follow the four steps below.

Determine eligible products and services

Are you going to allow only certain products or services to use this benefit? For example, you may decide that only orders over $100 are eligible. 

Predetermine your criteria and consider all of your options such as:

  • Popular store items
  • Incentivizing customers to increase their order
  • Ease of breaking a price into smaller portions

Choose a program type

There are two main ways a business can accept partial payments and installment payments: By managing installment plans within the business, or with the help of a third-party vendor. 

Self-management: By managing payment plans yourself, you’ll be in charge of conducting credit checks, issuing financing, and managing payment collections. 

Third-party management: By using a third-party vendor, they’ll make credit offers and collect payments. A benefit of third-party vendors is that they can save you both time and money and help keep you out of legal trouble.

Decide on the invoicing frequency

You have complete control over the invoicing frequency. As a business owner, the more cash you can rake in each month, the better. You don’t want to have outstanding balances for too long and risk having to cover the missing capital. 

However, you also want to allow breathing room for payments from your customers, seeing as that’s the main draw of partial payments. Many businesses choose a monthly payment plan, whereas others place it on a weekly schedule. 

Set up recurring payments

Within your payment processor, set up recurring payments specific to each customer. You’ll need the customer’s:

  • Name
  • Phone number
  • Linked account or credit card

After you’ve set them up in your system, all payments moving forward should come from their linked account or credit card.

Q&A for payment/installment plans

There are many forms of partial payments and many ways to accept partial payments from customers. While we’ve focused on payment and installment plans, some may get confused when it comes to their comparison to other payment methods. Such as:

  • Loans
  • Buy-now-pay-later
  • Consumer financing

Below, we’ll cover the questions regarding these payment methods, plus their comparisons and differences. 

Payments/installments vs. buy-now-pay-later

Buy-now-pay-later through companies like Klarna and Affirm are forms of an installment plan. 


  • Gives customers a set payment plan
  • Provides a hard set payoff date


  • These are third-party companies and aren’t offered in-house through your business. 

As a business owner, this means you need to share a portion of your profits with these third parties for their services.

Is customer financing the same as payment/installment plans? 

Yes, customer financing is the same as payment and installment plans. Customer financing is another way to say you offer partial payments to your customers either through in-house financing or a third-party company.

Is a payment plan a loan?

No, a payment plan is not a loan. Loans are typically issued by banks, credit unions, and other financial institutions and lenders. When customer financing comes from a business, it’s considered a payment plan or installment plan.

Can I accept partial payments with QuickBooks?

Yes, and there are two ways you can choose from to offer your customers partial payments; QuickBooks Online and QuickBooks Payments.

QuickBooks Online: A subscription-based online accounting solution that gives you the freedom to set up recurring sales receipts and enter the necessary information.

QuickBooks Payments: A payment processing service that also allows you to set up recurring payments for customers. 

Are partial payments right for your small business?

Payment plans are becoming a more popular payment option for both large and small businesses. Accepting partial payments and offering installment plans makes it easier for customers to make larger purchases.

In turn, companies can boost sales, increase customer loyalty, and attract new customers. With a small business payment processing solution, you can set up recurring payment plans and adjust the payment agreement schedule to meet your customers’ needs.

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