How to Offer Payment Plans: A Comprehensive Guide

Providing your customers with payment options tends to go hand and hand with increased sales. But simply integrating every payment option available is more akin to throwing mud at the wall. Knowing your customer base is key to choosing the right payment plan. Being strategic about payment plan choices will save you both time and money. In this article, we’ll go through the various payment plans that are available and who each is best suited for.

What are payment plans?

Payment plans allow your customers to pay on credit over a period of time defined by you. For some B2B industries, paying on credit is standard. So not offering a payment plan, generally via an invoice or a line of credit, can mean sending potential customers to your competitors. 

For consumers, they also may pay by invoice, line credit, or more often by credit cards. All of these forms of payment provide the consumer or business with a grace period. It is an attractive option when trying to bring in new customers.

Why offer payment plans?

Payment plans make the purchase decision much simpler for customers. Knowing they can spread a high dollar purchase out over time allows them to retain more working capital. Let’s look at a few other reasons why payment plans are important.

More sales

When customers don’t have to pay immediately, they can use those funds for something else. Basically, the customer is able to leverage their available funds. By offering a payment plan, you enable that leveraging, providing a more favorable purchasing scenario for the customer. 

Higher LTV

The lifetime value of customers can vary, but how long a customer stays with you doesn’t necessarily equate to the total they’ll spend with you. When customers are able to purchase on credit, they buy more. Some customers will purchase a lot in a short amount of time, while others may not require much and spend less over a longer period of time. Either way, both customers end up spending more with you than if they didn’t have the ability to purchase on credit.


Payment plans can be used in favorable conditions for accepting payment on credit. They can also be used for more adverse conditions, such as when a customer is late on their payment. In that case, there’s a lower chance of receiving payment in full than if you work with the customer to pay in installments or some similar arrangement over time. 

The customer is likely not paying the full invoice because they aren’t able to. Instead of demanding payment all at once, a payment plan gives control back to the customer, allowing them to pay on their terms. In this way, payment plans are more reliable and lower risk than trying to receive full payment.

What types of businesses can use payment plans?

Payment plans can work with almost any type of business. Below are three broad examples from three different industries.

Online businesses

Many online businesses opt for installment plans to give their customers more options. A lot of online purchases are impulse buys. Higher ticket items are not quite as impulsive. Customers still hesitate as they consider whether to shell out more money or not. But if you offer the customer a more convenient way to buy the product, such as an installment plan, you remove a high barrier to entry. Now the customer doesn’t have to worry about shelling so much money out at once. The higher ticket item is now reduced to a lower-priced product that the customer will buy each month until it is paid off.

B2B services

B2B deals are more complex and expensive, so offering a payment plan can spread out the cost over time and help B2B customers take the leap. This is similar to the above online business example. But with B2B products, transaction complexity adds another barrier to entry. There might not be much that can be done in regards to removing transaction complexity, but at least when you allow the customer to pay for the product over time, you remove one of two barriers to entry.

Small business financing

Small businesses often use financing to access expensive pieces of equipment. Small businesses are another case altogether. It isn’t so much that they hesitate with large purchases, it’s more that they simply don’t have the funds for such purchases unless some sort of payment schedule is agreed to. 

By providing payment plan options, you can open your business up to the many small businesses that help power America.

3 options for online businesses to offer payment plans

To outsource or to go in-house, that is the question. In this section, we go through some reasons for and against outsourcing.

1. Online credit line provider

Integrating payment plans directly on your website is a great way to expand your customer base. By using a service that will quickly approve or deny applications, handle the initial payment, and manage the payment plan, you can have a set it and forget online solution — companies such as [Resolve]) offer net terms online payment services.

2. In-house financing

If your staff has the expertise, you can run an in-house financing operation. However, this certainly requires more work and unless there is a specific reason to do it, it’s best to outsource. Some reasons to create an in-house payment plan may be for security reasons or the need to create a proprietary solution.

3. Banks and credit unions

Banks and credit unions provide payment plan services. Their services generally make sense for larger companies involved with B2B transactions. For smaller businesses, because they generate less volume, it will be difficult to recoup the cost charged by a financial institution.

What type of payment plans can you offer?

Payment plan credit is expressed in net terms. Net terms are the number of days a customer has to pay their bill. You can also offer discounts for early payments.

Net 30

Net 30 allows customers to order a product or service and have 30 days before payment is due. The customer can pay anytime within 30 days. If payment is not received after 30 days, a late fee will be accessed.

The merchant has flexibility on when the clock starts. This might be when the order occurs, the item ships or the item arrives at the customer’s location. If the product is digital or a service, it is more common for the 30 days to be based on the order completion date. 

Merchants will often offer a discount to customers who pay their invoices early. For example, the merchant may provide a 2% discount if the invoice is paid within 10 days instead of 30. Some merchants will provide a scaling discount. This might be 2% @ 10 days and 1% at 15 days. 

Discounts are represented in standard formats. A 2% discount for paying 10 days early on a net 30 invoice is represented as 2/10 net 30. For the 1%, 15 days discount, it is 1/15 net 30.

Net 60

Net 60 is just like Net 30 but with a 60 day grace period. As for any discounts, merchants have more options with longer-term invoices. The longer money sits with the customer, the more it costs the merchant. Providing a 5% discount for customers who pay within 20 days can result in the same net savings as a 2/10 net 30 invoice.

Net terms & credit management

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