Installment payments: Is it convenient for your business to sell in installments?

Offering installment payments for a product or service can be a great strategy to grab the attention of your potential customers and retain them. 

However, care must be taken to offer installment payments, as they can become a "double-edged sword" if the whole process gets out of hand.

• What does it mean to sell in installments?

• What are the advantages of offering installment payments?

• What are the disadvantages of offering installment payments?

What does it mean to sell in installments?

Installment sales are a collection strategy that companies manage when making a sale transaction with a Customer.

Within the framework of the agreements established between the two parties, it is decided to make payment in installments of the product or service offered within a certain period.

That is, it is a matter of making a sales invoice at the due date. The customer receives the product or service at first, but it is only in the future that the invoice is paid.

There are sectors that, due to their characteristics, make it impossible to carry out such management of the collection.

The most obvious case is that of food supermarkets, where their sales must always be in cash.

There are other types of activities that can offer their customers the possibility of making installment payments.

What are the advantages of offering installment payments?

• Increase your customer base.

For both private clients and professionals, making purchases in installments is an interesting opportunity, since it does not immediately make liquidity available.

Therefore, offering installment payments of a product or service can be a big claim for those "dubious" customers.

• Increase your billing

It is studied. And it's psychological. When we don't have to pay for a product or service right away, we tend to buy more without having much analysis of real needs.

So, if you start selling your products by offering installment payments, and through an effective marketing plan, your sales in the short/medium and long term will grow.

However, not everything can be positive and you usually experience some disadvantages when working with installment payments.

What are the disadvantages of offering installment payments?

• Reduce the liquidity of your business

Making sales on credit improves the liquidity and economic management of your customers. However, and as a result, it reduces your company's ability to have liquidity.

For this reason, you must have complete control of the economic management of your company. In addition to having well-secured collection times to avoid possible liquidity tensions at certain times.

It will be important to have insurance coverage for any defaults.

• Your accounting management has increased

Working on credit, your work in the area of accounting management increases. You must have checked the outstanding invoices, unpaid invoices, collection management, etc…

• Payment issues may appear

The main problem that can occur: that a customer does not want to pay. In a small business it is the most key and determining factor.

The fact of offering installment payments greatly increases the possibility of having unpaid installments.

For this reason it will be important and fundamental to decide whether to offer installment payments to all customers, or only with those who have a trusted professional relationship, or an economic study has been carried out to indicate whether they are solvent or not.

Therefore, in your business you will have to weigh the weight that the Advantages represent against the Disadvantages when proposing a new sales strategy based on the management of installment sales.

It's time to ask yourself: Is your company interested in offering installment payments?

In conclusion: yes, the payment in installments really offers you the opportunity to increase sales, it is a fact, now it is up to you to update yourself as it is already happening all over the world and take advantage of these advantages. Don't stay behind, choose ST PAYS and try it for free without obligation.