What is a payment plan for businesses
A payment plan lets your business customers pay off their debt in a way that is affordable. With a payment plan, your customers get the option to pay off purchases over a set period of time. The exact details of their payment will depend on how much they earn and how much they spend.
Payment plans can be used for a variety of businesses, including:
- Retail stores
- Service providers
- Ecommerce stores
Payment plans are particularly useful for business customers that are struggling with their cash flow. Not only do they make repayment manageable for these businesses, but they enable you to hasten the process of getting repaid.
How do payment plans work?
So what is a payment plan for businesses? By setting out a structured agreement between a business customer and yourself, payment plans allow you to outline the terms of an affordable repayment schedule. The majority of payment plans involve making regular payments over a set period of time, which is typically between 6 and 60 months. This can, however, vary depending on the financial situation of your debtor.
How to set up payment plans for your business
Before thinking about offering payment plans for your customers, it’s worth considering whether you have the financial capacity to do so. Offering payment plans requires you to be able to wait for payments, sometimes for large amounts of time. You’ll also need the resources to chase up late payments if necessary.
To make sure your payment plan is put together in the best way possible, you can apply a few strategies:
Offer a discount for customers who make timely payments – this can help to encourage early payment and helps to builds a good relationship with your customers.
Be understanding – each customer’s situation is different. Try to be as flexible as possible in order to accommodate their needs.
Be clear about the terms and conditions - set out your repayment schedule in writing - and make sure both you and your customer have signed it. You should also be clear about any late payment fees or interest charges that may apply.
Keep customers in the loop – once you’ve decided on the terms of the payment plan, get in touch with customers and let them know about the arrangement - how they can make payments.
A payment plan example
An example of a payment plan could be if a customer owes your business £500, and you’re happy to agree on a payment plan lasting 6 months. In this example, the customer would need to pay £83.34 per month. In this case, the customer would make 6 payments of £83.34, totaling £500 – the same amount they originally owed.
It’s more likely you’re adding interest to your plans, so you’ll be charging more than the amount borrowed to cover the interest. In this example, if you charged 3% interest per month on the outstanding debt, then the customer would need to pay £91.67 per month. This would mean that they would pay a total of £550 over the 6-month period – £50 more than the original debt.
As you can see, payment plans can be tailored to suit the needs of both your business and your customers. By taking the time to set up a payment plan that works for everyone, you can help to ensure a smooth and stress-free process for everyone involved.
Using iwocaPay to provide payment plans
With iwocaPay we’ll take care of this all for you so you can offer your business customers a payment plan - while still getting paid the full amount up front. We’ll pay your invoice in full, and take payments for your customer for you - no hassle, no fuss, no waiting on money.
You (or your customer - you choose) will pay a small fee for processing transactions made as part of a payment plan. If your customer decides to Pay Now, they don’t have to worry about any fees at all.
Get paid on your terms, every time.
- Borrow up to £500,000
- Repay early with no fees
- From 1 day to 24 months
- Applying won't affect your credit score
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