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 offering expensive or big ticket products and services, it can be hard for customers to make payments all at once. Especially considering hard financial times during COVID-19 and now with inflation accelerating, payment plans are necessary for consumers and essential for business owners.
By offering payment plans to your customers, you’re actually able to increase the revenue that your business is bringing in- even if it’s not all at once.
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. It describes a multi-step schedule for collecting payments on an invoice.
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.
Here are some of the benefits of having a payment plan:
Benefit 1 – It Builds Customer Relationships
Giving your customers different payment options allows them to value your company more as well as build customer loyalty. If they know they have payment options, the customer will most likely return or make another purchase from your business in the future. Therefore, this gives you a competitive advantage over other businesses who may not offer payment plans.
Benefit 2 – It Encourages More Revenue
Given the option to pay flexibly, customers will not only be encouraged to return to your business in the future, but they will also continue to make large purchases and order more items. Although payment plans may not give you large chunks of revenue all at once, in the long run, they do help increase revenue at the point of sale.
For example, at the beginning of a sale, if a customer is wanting to make a costly purchase, they will be more inclined to move forward with the item if you offer a payment plan. If you were to not offer the payment plan, the customer might second guess the large purchase.
Additionally, your payment plans could attract new customers. If you continue to expand to a broader pool of consumers, your revenue will definitely increase.
Benefit 3 – Customer Payment Plans Help You Avoid Non-Payment Issues
When customers can not 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.
Assemblage Can Help You
At Assemblage LLC, we offer bookkeeping and accounting services to small and medium-sized businesses. We handle full-cycle billing, preparing, and sending bills to your clients. We also review A/R aging and then follow up with your clients regarding collections. Contact us today for assistance!