Payment plans: letting a customer pay an invoice in instalments

A good customer calls about an invoice that is three weeks late. They are not disputing it. Business has been slow and they cannot pay £2,400 this month. You can keep sending reminders and get nothing, or you can agree a plan: three payments of £800 over three months. The second choice gets you paid and keeps the customer.

What a payment plan is

A payment plan splits what is owed on one invoice into smaller parts, each with its own date. The invoice does not change. Its number, its amount and its tax stay exactly as issued. What changes is when the money is due. Each part is recorded as a part payment against the same invoice, which stays open until the last one arrives.

That is different from billing a job in stages, where each stage has its own invoice for work done at that stage. For that, see milestone billing. It is also different from a deposit taken before work starts; see deposit invoices. A payment plan is for an invoice that already exists.

When to offer one

• The customer wants to pay and cannot do it at once. They told you so, and they suggested or accepted dates.
• You want to keep working with them. A plan is a favour, and customers remember it.
• The amount is large for them. A sum they could pay in a week does not need a plan, it needs a reminder.

And when not to:

• They dispute the invoice. Settle the dispute first. See what to do when a customer disputes an invoice.
• They have gone quiet. A plan needs someone to agree to it.
• They already broke a plan. One second chance is reasonable. A third plan rarely ends differently.

How to set it up

Keep it short

Two to six monthly parts cover most cases. The longer a plan runs, the more likely a payment is missed. If the customer asks for twelve months, ask what they could manage in six.

Take the first part now

Ask for the first payment on the day you agree, not a month later. It shows the plan is real, and it lowers what you are owed straight away.

Pick dates that suit their money

Ask when their own customers pay them, or when their month is strongest, and set the dates just after. A date they can meet is worth more than an early date they will miss.

Decide about fees and new work

If your terms allow a late fee, say whether it is paused while the plan is kept. Most businesses pause it. Also decide whether you will take on new work for them in the meantime, and whether that work is paid in advance. See late payment fees.

Put it in writing

A plan agreed on a call is forgotten in a week. Send one short message the same day and ask for a reply that says yes:

• “Hello, as agreed today, invoice OG/2026/0052 for £2,400.00 will be paid in three parts of £800.00, on 1 November, 1 December and 1 January. No late fee applies while these dates are kept. If a payment is missed, the full balance becomes due. Please reply to confirm.”

The message should name the invoice, the amount of each part, each date, and what happens if a date is missed. Nothing else is needed.

While the plan runs

• Record each payment the day it arrives, against the same invoice, so the balance is always right.
• Send a short note a few days before each date. It is a courtesy, and it works. Our payment reminder messages have the words.
• Thank them when a part is paid. One line is enough.

When a payment is missed

Write the next day. Ask what happened and when the payment will arrive. One late part, with a reason and a new date, is normal. If the new date is missed too, the plan has failed: say that the full balance is now due, and treat it as any other overdue invoice. A statement helps at that point, because it shows every part that was paid and what is left; see statement of account.

The short version

• A payment plan splits one issued invoice into dated parts. The invoice itself does not change.
• Offer it to a customer who wants to pay and cannot pay at once. Do not offer it in place of settling a dispute.
• Keep it short, take the first part now and pick dates they can meet.
• Confirm the parts, the dates and what happens if one is missed, in writing.
• Record every payment against the invoice, and act the day after a missed one.