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Installment Payments on Invoices: How to Offer Flexible Payment Options

Installment payment can make sense for larger amounts. Learn how to offer installment payment, document it legally secure and minimize risks.

Thomas Richter · ·8 min read read

Sometimes a customer can't pay the invoice amount all at once. An installment payment agreement can then be the solution - for both sides. Here's how to proceed.

When is installment payment sensible?

For you as a provider

  • Customer loyalty: Flexible payment options can be a sales argument
  • Higher orders: Customers order more if they can pay in installments
  • Fewer payment defaults: Better installments than no payment at all

For the customer

  • Liquidity conservation: Larger investments become manageable
  • Planability: Monthly consistent amounts
  • Immediate use: Goods or service immediately, payment distributed

Correctly arrange installment payment

Written agreement

An installment payment agreement should always be in writing. It contains:

  • Total amount of the claim
  • Number of installments
  • Amount of individual installments
  • Due dates
  • If applicable, interest or fees
  • Consequences in case of payment default

Sample installment payment agreement


INSTALLMENT PAYMENT AGREEMENT

Between [Your Company] and [Customer]

Regarding: Invoice No. 2025-089 from 01.11.2025
Total amount: 3,000.00 €

The parties agree to the following installment payment:

Installment 1: 500.00 € due on 15.11.2025
Installment 2: 500.00 € due on 15.12.2025
Installment 3: 500.00 € due on 15.01.2026
Installment 4: 500.00 € due on 15.02.2026
Installment 5: 500.00 € due on 15.03.2026
Installment 6: 500.00 € due on 15.04.2026

In case of default of one installment, the entire remaining amount becomes immediately due.

[Signatures]

Interest on installment payment

You can charge interest for installment payment - after all, you're granting the customer credit. Common are:

  • In B2B sector: 8-12% p.a. above the base rate
  • In B2C sector: Effective interest must be stated (consumer protection)

Important for consumers: For installment payment with interest, consumer credit regulations apply (§§ 491 ff. BGB). In case of doubt, get legal advice.

Minimize risks

1. Credit check

Before offering installment payment, check the customer's creditworthiness. For new customers: Request down payment.

2. Retention of title

Until full payment, the goods remain your property. This must be stated in the terms and conditions or the agreement.

3. Immediate maturity in case of default

Agree that if one installment is not paid, the entire remaining amount becomes immediately due (acceleration clause).

4. Direct debit procedure

Have a SEPA direct debit authorization given. This way you actively collect the money instead of waiting for transfers.

Accounting treatment

VAT

VAT is basically due upon service provision - not only upon payment receipt (with accrual accounting). Installment payment doesn't change this.

Receivables

Book the total claim as debtor. With each installment, the open item is reduced.

Alternatives to installment payment

Factoring

You sell the claim to a factoring provider and get money immediately. The customer pays in installments to the factor.

Financing through third parties

External providers (e.g., Klarna, PayPal installment payment) take over the risk. You get the full amount, the customer pays to the provider.

Conclusion

Installment payment can be a sensible instrument - if you know and hedge the risks. A written agreement, retention of title and direct debit procedure protect you from payment defaults.

Frequently asked questions

Do I have to offer installment payment?

No, installment payment is voluntary. You decide whether and under what conditions you offer it. For existing customers with good payment history, it can be worthwhile, for new customers rather not.

How do I write the invoice for installment payment?

The invoice itself remains normal - with total amount and regular payment term. The installment payment agreement is a separate document that refers to the invoice.

What happens if the customer doesn't pay an installment?

According to typical acceleration clause, the entire remaining amount then becomes immediately due. You can send reminders and possibly take legal action. If you've agreed on retention of title, you can reclaim the goods.

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