Instalment payment is one of the best ways to encourage customers to buy what they would ordinarily not be able to afford. Leveraging this fantastic payment option can help businesses remove barriers to sales and offer customers flexibility and convenience during purchases.
So are you a business owner that has never practised or utilised the instalment payment option? Then you may have been missing a lot of benefits because when you hear about instalment payment for the first time, it may seem like it has everything to offer your customers and nothing to benefit your business, but in the real sense, it isn’t so.
If you are wondering how instalment payment can benefit your business and the best time to introduce it, then this guide is just what you need.
What is Instalment Payment?
Instalment payment is a payment method or a payment plan where businesses allow buyers to purchase things and pay in small portions within a stipulated time. Instalment payments are of different types, which are discussed below.
- Instalment sales: an instalment payment arranged by a buyer and a seller where the buyer can pay for goods purchased in small portions or parts within a given time.
- Instalment debts: money borrowed from friends or family or payment for any other type of debt in instalments. For example, an employee borrows money from her company and makes an arrangement to pay back with 20% of her salary every month for six months.
- Instalment loans: most financial institutions grant loans to people that can be paid through instalments. However, there is usually an agreed interest to be paid with the money, and a time frame is given for the payment’s completion.
While there are different instalment payments, they all still follow the same principle. As a business owner, instalment payments will allow you to easily sell expensive items or products and still make the same profits.
When considering strategies to increase sales in your business, you might easily think of reducing the price of your commodities, but this would also affect your profit margin, and with time you may not be able to operate anymore.
However, instead of reducing the prices of your commodities, you can let people pay for them in parts or small portions, and at the end of the day, you and your customers will not lose anything.
Benefits of Instalment Payment
If you now have an adequate understanding of what instalment payment entails, you must want to know the numerous benefits it offers. Both you and your customers will benefit so many things from this payment plan. So here are some of the amazing benefits instalment payment offers.
Benefit to Customers
When you offer instalment payments in your business, your customers get a chance to buy anything of interest that they might not ordinarily be able to afford, especially those customers that work with strict budgets monthly or yearly. So here is how your customers can benefit from instalment payments.
Encourage Smart Spending
Many people may have the resources to purchase a product or item and make complete payment for it, but in the present day, it is unwise to spend everything you have on a single purchase. So making instalment payments will help people save money, spend wisely and still buy whatever they desire.
Unplanned Purchases Without Going Above Preset Budgets
It is possible to see something you would love to buy but cannot afford or find that product you have been searching for but can not afford at that moment.
Instalment payment allows people to buy things on impulse without spending beyond their monthly or weekly budgets. This is very beneficial, especially to those with families to cater for or who love to be budget conscious.
Better Finance Management
With this payment plan, people can easily manage how much they spend monthly by spreading their payments and adding them to their weekly or daily expenses. This will give them a clear picture of how they spend their money, making it easier to monitor their finances.
More Favourable Terms Than a Loan
When people plan to buy expensive things like a house, car, home appliances, equipment for a business, etc., they may easily think of getting a loan. However, many terms and conditions are attached to loans, including interests, collateral, etc.
With instalment payments, they can simply purchase these things and pay gradually while they enjoy using them without dealing with strict or harsh terms and conditions.
Benefit to Business
It is easy to think about the numerous benefits instalment payments bring for customers, but many people would ask whether the business owners have anything to gain. Yes, business owners benefit a lot and here are some of the many benefits of instalment payment for businesses.
Increased Sales
This is one of the most significant benefits of instalment payment for businesses. If you have been running a business for some time, you must have noticed how your customers react to the prices of things they cannot afford; some promise to come back another time and may never return.
This situation makes you lose customers and makes your customers unhappy as well. Still, with instalment payments, the prices of commodities will never be a barrier in your business as people will always buy what they want regardless of the cost, and thereby leading to increased sales.
Improved Customer Experience
This may surprise you, but if people cannot get what they want from your business because it is expensive, they will somehow be unhappy with your services, and some might think they will get it at a lower price elsewhere.
Instalment payment can help you improve customer experience as your shop will be a one-stop spot for anything people want regardless of prices. As a result, your customers will be comfortable with big purchases and not have to worry about their budgets.
Non-Stop Cash Flow
Letting your customers pay for products or commodities in small portions can provide a non-stop cash flow for your business, as you will keep receiving money for previous sales even when you don’t make new sales.
Furthermore, the increased sales this payment plan brings will also lead to increased cash flow.
Increased Customer Loyalty
When you express compassion and show your customers that you understand their financial conditions, they tend to trust your business more and become more loyal to you. Instalment payment can go a long way in inciting your customers’ commitment, making them want to stick to your business.
When Should you Introduce Instalment Payment in Your Business?
As a business owner, there is no specific time to introduce instalment payment to your business; some businesses even offer this payment plan right from the beginner. However, here are some occasions that would make you consider instalment payment for your business.
- When you need to prioritise cash flow due to financial challenges.
- When other strategies to increase sales have proven ineffective.
- If you sell very expensive things like cars, electronics, houses, home appliances, etc.
- When an invoice is for a large sum of money.
- To increase the sales of a product lacking attention due to price.
Factors to Consider Before Introducing Instalment Payment in Your Business
While instalment payment may offer many benefits for your business, it is important to consider some things before you introduce it in your business.
- If your business is a partnership or limited liability company, then you must seek the approval of other owners before introducing an instalment payment.
- The longer the term of the instalment payment agreement, the more risk your business would face, so offering this payment plan with shorter time frames is better.
- You might also consider adding an interest fee to generate more income for your business and encourage customers to complete their payments on time.
- It would be best to request a certain percentage of down payment on products to ensure the smooth running of your business.
- It would also be best to consider getting this payment agreement in writing and having your customers sign it; this document should contain your customers’ details and the terms of the agreement.
The good part of this payment plan is that there are many resources that can make your business operations smooth and normal even though you offer instalment payments. For example, you can use an invoicing software to keep track of pending payments and ensure you don’t miss anything. Some of these software are free but have paid plans with added features.
Check out: Best Free Invoice Generators
In addition, there are some platforms that can help you regulate your instalment payment plans in such a way that they will make complete payment on behalf of the customer and get back their money by instalment from the customer; this way, you will be able to offer instalment payments to customers, but you won’t be responsible for it, and it won’t affect your business in any way.
Here are some reliable instalment payment software you can maximise to take your business to the next level.
