Dictionary
Debitoor's accounting dictionary
Instalment payments

Instalment payments - What are instalment payments?

Instalment payments refer to a customer paying a bill in small portions throughout a fixed period of time.

Does your company offer instalment payments? Find out how to record this in your invoicing software on our blog: ‘How to record partial payments on your invoice’.

Instalment payments are a payment plan arranged between the buyer and the seller. It is usually clearly stated in the payment terms in a contract or on an invoice. These payments are generally arranged for a large order.

The different types of instalments

The term ‘instalment’ refers to anything paid in smaller batches over a period of time. This may include:

  • Instalment sale between a buyer and seller: For instance, purchasing a car with monthly instalments. The agreement is between the car dealership and the car purchaser.
  • Instalment loans: For instance, you receive a mortgage loan from a bank and pay it back in instalments. The payments are towards a loan and usually incur interest.
  • Instalment debt: For instance, paying off your tax bill, or someone who gave you money. Any debt that is repaid in instalments.

The advantages of instalment payments

Instalment payments can benefit both the buyer and the seller.

Some benefits for the customer are:

  • Keeping track of your finances
  • Stretching the cost of a purchase over a period of time
  • Keeping to your budget
  • Low monthly payments

Some benefits for the business are:

  • Allows more flexibility for your customers
  • Will bring in more sales
  • Regulates cash flow

Recording instalment payments on invoicing software

Invoicing software is a great way to keep track of your instalment payments and make sure your customers pay on time. Instalment payments can be recorded either by partial payments on a single invoice, or recurring invoices for each instalment.

Partial payments

First, you will need to create the invoice for the client, and clearly state the payment terms and instalment periods on the invoice. With Debitoor, you can create a customised invoice in under a minute and send it to the customer.

When it comes time for the customer to pay the first instalment, you will add a partial payment to the invoice. On Debitoor, you simply open the invoice from the invoice list, click ‘Add Payment’, write a description and the amount paid and click ‘Save’. The invoice will automatically update to show that it is partially paid, and the amount remaining.

You can do this for every payment until the invoice is paid in full.

Recurring invoices

If you prefer to use recurring invoices rather than the partial payment option, that is certainly possible with Debitoor.

You can set up recurring invoices for each instalment amount. It would be beneficial to have a payment contract signed by the customer explaining the payment plan.

To create recurring invoices on Debitoor, go to the ‘Invoices’ tab, and select ‘Recurring’. On this page, you can select when the next invoice will be issued, how often the invoices will be sent, and how many times they will be sent.

You can also choose to have the recurring invoices created and sent automatically by the system, or have them created but sent manually by you. In the latter, you will be able to check over every invoice to ensure the information is correct.