Deferred Payments vs. Installment Plans
Purchasing a good or service from your business may be more manageable if the customer can break up their payment or settle their balance at a later date. The revenue will still come your business's way in the future, while the flexibility can convert some undecided leads into paying customers. Deferred payments and installment payments are two options that make purchases easier for the customer.
At CSG Forte, we help businesses drive revenue by providing tailored payment solutions that are compatible with flexible structures.
What Is a Deferred Payment?
Deferring a payment means the customer can access the product or service now and pay in full at the end of a three-phase process.
The first phase is the purchase agreement. You provide what the customer needs with little to no upfront expenses. The customer agrees to submit a deferred payment, meaning they will settle up in full later. You and the customer enter a purchase agreement that includes a deferral due date.
The second phase—the deferment period—is the time between the agreement and the payment due date. You can send due date reminders to your customers during this time, either independently or through the payment service provider.
The third phase is the payment period, which begins on the payment due date. Your customer is responsible for paying the full balance at that time. Some deferral agreements allow the customer to begin a payment schedule starting on the due date.
Common Reasons to Defer Payment
Deferred payment is an option when the customer needs a product or service immediately but has immediate financial constraints. Common deferred payment use cases include:
Business-to-business (B2B) transactions: Businesses can receive essential products and services quickly and agree to a deferred payment date.
Retail purchases: Consumers can take home expensive goods to use that day with payment deferred, meaning they can repay the merchant later.
School tuition: Universities and student tuition financers set due dates after the student receives some or all of their education.
Healthcare: Practitioners often provide the care patients need when they need it, then allow patients to pay the bill later.
What Is an Installment Payment?
An installment payment is one a customer submits as part of a payment plan. Within this structure, you provide access to the good or service that your customer needs. The customer agrees to repay their balance over time in regular installments.