Payment plans can be a tricky issue for many kinds of businesses. SMEs often can’t afford to spend the resources to create and sell a product without receiving any profit until months down the line. On the other hand, they also can’t afford to lose the business of consumers who need their products, but who lack the funds to pay up front.
Offering customer payment plans through your financial institution neatly sidesteps this issue by ensuring that you get paid up front, while giving your customer the payment plan they need. They can make your products more accessible, and can actually help you stabilise your finances so you can grow your business in the long run. Here are a few important ways that you can use payment plan financing to make your business more competitive.
Accessing more customers
Whether your customers are private individuals or other businesses, most won’t have the budget to make large purchases on short notice. This is a major problem, because it’s difficult to plan ahead and save money in anticipation of a future need. You’ll lose those potential customers unless you can accommodate them.
By offering a payment plan, you get access to a market of customers who otherwise wouldn’t be able to afford your product. The potential sales increase depends strongly on your industry, but it can have an enormous impact. Even better, if you work in an industry that doesn’t traditionally offer financing, you’ll gain a critical competitive advantage by reaching out to a previously neglected and eager group of consumers.
Making better service possible for clients
Besides just growing your customer base, deferring your clients’ payment obligations makes it possible for them to plan ahead to commit future resources, instead of relying on whatever funding they currently have available . As a result, they’ll be better able to commit to buying additional complementary products and services that they might need.
For example, a $20,000 up-front payment for a 6 month social media marketing package might be everything that the client of a marketing company can afford at the time of purchase. However, the client may also have the revenue to commit $3,000 more every month going forward. Using a payment plan, they might then be able to afford to add some content and PPC services while paying something on the order of $6,000 per month.
By combining social, PPC, and content services, the marketing company will be able to run a more effective and well integrated marketing campaign, and the client will get a better return on their investment. Not only does that help business diversify their products and services, it also further supports our next point…
Building customer retention
Retaining customers is a key part of growing your business, and payment plans can play a role in this as well. The prospect of a massive lump sum payment is a major disincentive to keep customers from renewing a contract, or looking for other alternatives that put less stress on their finances.
Putting a client on a payment plan helps to alleviate this issue in a few ways. First off, it directly reduces that financial stress, making your business the aforementioned “other alternative” to a business that doesn’t offer financing. Secondly, payment plans change the way clients think about their purchase, especially if they’re buying a service. Making regular payments offers a sense of continuity and process, while paying in one or two installments gives an impression of discrete product or service units.
Encouraging that sense of continuity is important, because it helps to give clients the accurate sense that halting their service will disrupt an ongoing project and impact their returns. This way the client’s focus is drawn more toward what they’re actually paying for rather than just the price tag.
Getting paid more reliably
Pursuing unpaid invoices is the never-ending chore of nearly every business. These unreliable customers can wreak havoc on your finances, and payment plans can actually make it worse if you’re managing them yourself. The time, money and effort spent making collection calls, renegotiating, or litigating can put businesses off the idea of payment plans altogether. Worse, they can absorb so much of your time that other critical issues aren’t addressed.
Fortunately this isn’t an issue if your payment plans are financed through an institution like Fifo Capital. We set the payment plan up for your customers, and pay you entirely at the time of purchase. The client then makes their payments to Fifo, not to your business. This eliminates the huge amount of time and effort that small business owners would otherwise potentially have to invest in pursuing payment on late invoices.
Reliably getting paid on time can make all the difference for your business. SMEs that don’t have to worry about these issues are free to find and pursue new business opportunities that’ll help them develop and grow their ventures.
Payment plans are designed to ease the burden on both businesses and their customers. By offering them, you make your business more approachable, easier to work with and easier to manage.