Get all the details with my take on successfully managing payment plans in (virtually) any small business.

I have been pondering payment plans. I draft many Service Agreements. Every Service Agreement has Payment Terms included, and MANY also have Payment Plan options available. It’s essential to get Payment Plan terms right because to enforce them, you need to have the payment plan offer and process addressed and agreed to in your Service Agreement.

There is no right or wrong way to set up payment plans. However, there is a strong argument for offering a well thought out payment plan for your service packages.

Additional fees for payment plans

The main reasons people add a fee for a payment plan are:

  1. To manage the risk of taking on a client that may stop paying after a specific period.
  2. To manage the risk of non-payment or delayed payment by giving a customer time to pay.
  3. Time to pay is like a loan.
  4. To compensate for the delay in using funds for services that are underway or delivered.
  5. To compensate for providing the ability for someone to start their work with you and get their outcomes sooner rather than later.
  6. To cover transaction processing fees each time an instalment payment is processed.

Splitting payments into two instalments over two weeks or two months does not necessitate an additional administrative charge; however, multiple instalments over an extended period is a different story and expense for your business.


Payment in Full discounts

Another way to manage a payment plan is to present the upfront Payment in Full fee as the discounted fee for your service package or program.

So, if your fee is $1000 and you charge a payment plan of $200 to be paid in 6 monthly instalments, you would present the full-service package fee as $1200 (paid in 6 x instalments). However, an upfront payment is discounted by $200 to $1000.

Payment in full discounts are common in everyday life, when buying in bulk, for example, and used by insurance companies, utility companies and the like. Why? Because administering monthly payments cost more in administration time and money.

A discount for Payment in Full instead of a payment plan encourages full payment and reduces administrative tasks. It also reduces the risk of non-payment.

Where a customer chooses to pay in instalments, their choice means more administrative tasks, time, cost, and increased risk for the business. The fee is designed to cover some of these costs.

Extra time and work are involved in:

  • Following up with declined payments caused by updated cards, if the customer has forgotten to update with the payment processor.
  • Cards declined due to insufficient funds.
  • Customers ghosting’ you and not paying at all.
  • Lack of communication from a customer who is having difficulty paying.


Suitable payment plans can grow your business

When your business grows, your number of payment plans is likely to increase. You will need to allocate more time and cost to manage the additional issues, so a fee is justified and necessary. And it is likely your business grew because you offered a payment plan and were able to reach and support more people who need your services.

The critical thing to remember is there is no right or wrong. Charging a payment plan fee or building in a Payment in Full discount is a business decision. Every business has a different approach to pricing and customer relationships depending on their service, mindset, financial situation, money management, and values.

Whatever you decide to do, you must include full terms in your Service Agreement about any applicable discounts and payment plans, including payment plan fees, duration and non-payment consequences, to be able to enforce those terms.


I currently offer payment plans for all drafting services. These are by application only. No additional fees apply to the payment plan; however, a Payment in Full discount is applied.

People wishing to pay in full may split their payment into two payments for invoices above $1000. Book a legal contract review with me ASAP to ensure your payment plans are protecting your business.