Letting customers pay in instalments: can your small business afford to say yes?

A good customer asks if they can pay the job off over a few months. You want the work, you trust them, and “yes” is on the tip of your tongue. But your suppliers, your crew and your landlord will not take instalments. Before you agree, it helps to see the arrangement for what it is: you are lending your customer the price of the job, and your bank balance is the lender.

That is not a reason to say no. It is a reason to do the sums first, which takes about ten minutes.

What does an instalment plan actually do to your cash?

When a customer pays upfront, your cash dips and recovers within days. On an instalment plan the dip gets deeper and lasts longer, because costs go out in the first weeks and the money trickles back over months.

Take a worked example. It is an illustration, not a real job.

A $6,000 job costs you $4,000 in materials and labour, all paid in the first three weeks. The customer asks to pay in three equal instalments: on acceptance, at day 30 and at day 60.

Day	Cash in	Cash out	Running position on this job
0	$2,000	$0	+$2,000
Weeks 1–3	$0	$4,000	-$2,000
30	$2,000	$0	$0
60	$2,000	$0	+$2,000

Your low point is $2,000 below zero for about a month, on a job that earns you $2,000. In other words, for 30 days you are carrying a bill equal to the entire profit, and for the next 30 you are breaking even. If you run three or four jobs like this at once, the low point multiplies, and it is exactly the kind of gap that makes payroll week uncomfortable.

Now change one thing: ask for a 50% deposit, then two payments of $1,500 at day 30 and day 60.

Day	Cash in	Cash out	Running position
0	$3,000	$0	+$3,000
Weeks 1–3	$0	$4,000	-$1,000
30	$1,500	$0	+$500
60	$1,500	$0	+$2,000

Same customer, same total, same 60 days, but the low point halves. The deposit does more for you than a shorter schedule. The rule most owners land on: the deposit should cover your direct costs, or as close as the customer will accept.

How do you decide if you can afford it?

Use three numbers.

1. Your cash low point across all active plans, worked out like the tables above.
2. Your spare cash that is not already earmarked for wages, rent, BAS and super in the same window.
3. The cost of closing the gap if spare cash is not enough: a bigger deposit, a shorter plan, or short-term funding.

If low point is less than spare cash, say yes. If it is not, you have three levers, and it is far better to pull one before you commit than after the second instalment is late. Our cash flow gap calculator does the arithmetic if you would rather not build a spreadsheet, and the 13-week cash flow forecast shows where the plan lands against the rest of your commitments.

How should you price the delay?

A payment plan costs you something, even if you never write it down. Money tied up for 30 or 60 days could have paid a supplier early, avoided a short-term borrowing cost or covered a quiet week. There are three common ways to handle that:

• Build it into the quote. If a plan customer’s price is $6,000, your pay-upfront price might be $5,850. Offering a small discount for paying in full is often easier to accept than a surcharge for paying over time.
• Add a flat plan fee. A set dollar amount, shown on the quote, such as $120 for a three-part plan. A flat fee is easy to explain.
• Absorb it for the right customers. A long-standing repeat customer with a clean record might simply get the terms. Just know what it costs.

If you borrow to carry the gap, ask for the total dollar cost of the facility over the period you will actually use it, and make sure your price covers at least that. If the margin is thinner than the cost of carrying the job, the plan loses money even when everyone pays.

If your customers are households rather than businesses and you plan to add interest or fees, have a look at ASIC’s consumer credit guidance first. Deposits and staged payments on their own are a different thing from charging for credit.

What is the GST trap on instalment plans?

This one catches owners out. If you account for GST on the non-cash (accrual) method and you invoice the whole $6,000 at the start, the GST on that invoice is generally reportable in the BAS period it is issued, even though you have only collected a third of it. On the cash method you account for GST as payments arrive. The ATO’s guidance on choosing an accounting method explains who can use which, and the $10 million aggregated turnover mark is the usual dividing line.

Check which method you are on, then use this simple fix: issue a separate tax invoice for each instalment rather than one invoice for the lot, and keep the schedule in the agreement. That keeps GST in step with the cash you have actually received. It is also a good moment to check you are setting aside tax from every sale, so a plan’s GST does not turn up as a surprise.

Ready to see whether a short-term facility could carry your next payment plan? Start a 60-second enquiry. There is no credit check when you enquire.

What belongs in the agreement?

Keep it to one page. At a minimum:

• the total price, the amount and date of each instalment, and the method of payment;
• that each instalment is invoiced separately (see GST above);
• what happens if a payment is missed: a grace period of, say, five business days, then your right to pause work or withhold the next stage;
• ownership of goods or deliverables until paid in full, where that is appropriate for your trade;
• how a dispute about the work is raised, so a quality complaint does not become a reason to stop paying.

Make it fair. Small businesses (generally under 100 employees or under $10 million annual turnover) are protected against unfair terms in standard form contracts, and ASIC says penalties apply since the reforms started on 9 November 2023. A plan that lets you cancel at will but gives a small-business customer no way out is the kind of one-sided term that gets challenged. The same wording works for you either way: be specific, be balanced.

Our guide to setting payment terms covers the broader wording of quotes and invoices.

Which customers get the yes?

You do not have to offer plans to everyone. Many owners use a quick filter:

1. Repeat customer with a clean payment history. Yes, within your limits.
2. New customer, job under your comfort amount. Yes with a larger deposit.
3. New customer, large job. Ask for a bigger deposit and shorter schedule, or tie instalments to milestones you can see (materials delivered, stage complete) rather than calendar dates.
4. Customer who has already paid late or disputed an invoice. Pay upfront, or no plan.

Progress payments linked to the work are safer than calendar instalments because the customer’s cash goes in as your costs go out.

What if the customer misses a payment?

Decide your response before it happens, not after. A reasonable sequence is a reminder on the due date, a call on day three, a written notice on day seven and a pause on further work once the grace period passes. Chase fast: the longer a missed instalment sits, the less likely it is paid on time. Our collections routine has scripts for each step.

Remember the backdrop. Even large businesses are not perfect payers. The government’s Payment Times Reporting Scheme reported in its August 2026 update that 69.8% of small business invoices were paid within 30 days, which means almost one in three were not. If big, well-resourced customers take longer than 30 days, assume an instalment customer will occasionally be late too, and keep a buffer for it.

When does it make sense to fund the gap?

If you have worked out the low point and it is bigger than your spare cash, you do not have to turn the job down. Funding the gap with a short-term facility that matches the length of the plan is a legitimate tool: the loan is repaid out of the instalments it is carrying. The test is simple. Does the job’s margin, after the cost of the facility, still leave you better off? If yes, the plan is a sound piece of growth. If not, change the deposit or the price instead.

What to avoid is using a long-term loan for a 60-day problem, or borrowing to carry a customer who is already slow. Match the facility to the plan, and read our guide to matching loan term to purpose if you are unsure.

A good customer, a good job and a gap you can plan for

Saying yes to a payment plan should feel like a decision, not a gamble. Once you know the low point, you can say “yes, with a 50% deposit” confidently, or fund the gap for the weeks it matters and keep the customer.

If your numbers show a gap bigger than your cash, we can help. Our cash flow loans and cash flow gap funding are built for exactly this: short-term money sized on how your business trades, not a bank’s idea of a perfect balance sheet.

Enquiring takes about 60 seconds, and your credit file isn’t touched just for asking, so you can find out where you stand before you say a word to your customer. We won’t send your details to a pile of lenders either. A real person looks at your situation and calls you to talk it through. Fill in the form accurately, including your monthly turnover, and we can match you with the right option the first time.

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