How to Reschedule Missed Installment Payments
Helping creatives get the money they deserve
As a small business owner sometimes you charge enough for services that installed payments from your clients is a reasonable solution.
Instead of charging a client $10K upfront for services you may charge ten installments of $1K and plan out the services accordingly within that period.
Here are the pros to the installment plan:
- Easier path to an agreement for clients (those that have $1K each month but not $10K now)
- Easy revenue forecasting (ten months into the future)
- Should help secure more clients
Below is what a $10K installment plan from last February would have looked like.
If the client made all payments by the due date then the entire $10K would be paid off on November 1st.
But here are the cons to the installment plan:
- More billing requirements (ten invoices for $1K instead of one invoice for $10K)
- Future income is susceptible to shock events
- There is therefore no guaranty you will collect all payments
When clients cannot make payments due to shock events, like the current financial crisis, then the plan can get out of whack and the business financials are negatively impacted.
A client that lost income when businesses began closing in March of last year may have had trouble making that April 1st payment. The payment, and all subsequently missed payments, would show up as past due on your businesses financial statements.
Rescheduling Payments
A client that regained their income in June, and wanted to resume payments, would likely be unable to pay the $3K owed at one time to get current.
The business move here is to reschedule the missed payments to the end of the payment period so they can resume the regular payments and everything is current on your financial statements.
You simply change the date of the invoices to the next open date in the installment sequence.
Now the three missed payments are no longer showing up as past due, the next payment due is July 1st, and if all future payments are made on time then the client is paid off on February 1st, 2021 (instead of November 1st, 2020).
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