How to Set Up a Payment Plan in Xero (A Practical Guide)

One of the most common questions in the Xero community boards and on Google is some version of: "Can I set up a payment plan in Xero?" The answer is yes, sort of, but not in the way most people mean when they ask.

Xero itself doesn't have a native "payment plan" feature that lets you split an invoice into scheduled instalments, track them automatically, remind the customer before each one, and keep the arrangement visible to your team. What Xero does have is the underlying pieces: invoices, part-payments, online payment integrations, and repeating invoices. Most businesses end up stitching those together manually, which works until someone misses a date and the whole thing falls apart.

This guide covers the two real options: the manual approach using Xero's built-in tools, and the automated approach using Paidnice to create proper, trackable payment plans on any Xero invoice. If you're setting up payment plans for customers who can't pay in full right now, or you want to proactively offer instalment options on larger invoices, this is how to do it.

Can you set up a payment plan in Xero natively?

Not in the formal sense. Xero doesn't have a feature where you click "Create payment plan," pick three instalments, and have the system track them for you. What Xero supports is adjacent functionality:

Part-payments against a single invoice. A customer can pay an invoice in several chunks. Xero will allocate each payment against the invoice balance and the invoice stays open until it's paid in full. That works, but nothing schedules the next payment or chases it if it's late.

Repeating invoices. You can set up an invoice template that generates automatically every week or month. This is useful for ongoing subscription-style billing, but it's not a payment plan. A payment plan splits a single fixed amount across multiple dates. A repeating invoice creates multiple separate invoices.

Online payment integrations. Through Stripe, GoCardless, and a handful of other connected payment services, you can let customers authorise direct debits or saved card payments. Some of these services offer their own instalment flows, but the schedule lives inside the payment provider, not inside Xero. Your invoice in Xero still shows as unpaid until each instalment comes through.

None of these are a true payment plan. They're workarounds. The real workflow most Xero users end up running looks like this: agree verbally on three monthly instalments, add a note to the invoice, put reminders in a spreadsheet, hope the customer pays on time, and chase them manually if they don't.

The manual way: how to set up monthly payments in Xero

If you want to run a payment plan using only Xero's built-in tools, here's the process most businesses land on. It works for simple arrangements with a small number of customers and low volume.

1. Leave the invoice as a single invoice in Xero. Don't split it into multiple invoices. Splitting creates reconciliation headaches later.
2. Agree the schedule with the customer in writing. Email is fine. Specify the instalment amounts, the dates, and what happens if a payment is missed.
3. Add the agreed schedule to the invoice reference or a note field in Xero. This makes it visible to anyone else on your team who opens the invoice. It does not notify anyone or trigger reminders.
4. Set calendar reminders for yourself on each due date so you can check whether the payment has come through.
5. Reconcile each part-payment as it arrives. In Xero, match the bank transaction to the invoice, and the remaining balance will update.
6. Follow up manually if an instalment is late. There's no automatic escalation.

This workflow is fine for one or two arrangements at a time. It breaks down fast. If you have ten customers on payment plans, you're tracking thirty-plus upcoming dates in a spreadsheet, and any missed instalment turns into a phone call you have to remember to make. Your customer doesn't see the schedule on their invoice. No one else on your team sees it either.

The bigger issue is visibility. When the customer calls asking "what do I owe you now," you're digging through email threads to find the original agreement. When a team member takes over the account, they have no record of what was agreed. When a payment is missed, you find out days or weeks later.

The automated way: payment plans with Paidnice

Paidnice is an accounts receivable automation layer that sits on top of Xero. It handles reminders, late fees, statements, and (as of 2026) proper payment plans. The payment plan feature was built specifically to solve the gap Xero leaves open: formal instalment arrangements on any invoice, with automatic tracking, reminders, and full visibility for both you and the customer.

Here's what you can do with Paidnice payment plans that you can't do in Xero alone.

Create a payment plan on any Xero invoice in under a minute

Open any invoice in Paidnice, choose the number of instalments, pick the frequency (weekly or monthly), and optionally add an establishment fee or surcharge. You see a live preview of every instalment date and amount before you confirm. Once created, the plan is locked in and everyone involved has the same view of what's owed and when.

The schedule syncs to the Xero invoice

This is the part that matters for team visibility. The payment plan schedule gets written directly onto the invoice inside Paidnice, inside Xero, and on the customer's PDF. So if your bookkeeper opens the invoice in Xero, they see the full schedule. If your customer opens the PDF, they see the schedule. There's one source of truth, and it's on the document everyone already looks at.

Automatic reminders for every instalment

Paidnice lets you configure reminders before and after each instalment date, using the same reminder engine you'd use for normal overdue invoices. You can BCC yourself on the reminders so you're notified the moment an instalment is missed. For a three-month plan, that's six or more automated touchpoints you're not manually sending.

Let customers set up their own payment plan

This is the feature most useful for accounting firms, consultancies, and any business with predictable large invoices (annual tax prep, retainer renewals, project deposits). You configure the rules in Paidnice (for example, up to 12 monthly instalments, with a 3% surcharge), expose the option in your customer portal, and let customers choose their own schedule and agree to it themselves. The plan is created, the Xero invoice is updated, and no one on your team had to be involved.

Cancel a plan cleanly if circumstances change

If a customer situation changes and you need to remove the plan, you can cancel it from inside Paidnice. The Xero invoice is updated to reflect the removal, including any surcharge. No stale information, no manual correction.

How to set up your first Xero payment plan in Paidnice

If you're ready to move off the spreadsheet, here's the short version of the setup:

1. Connect Paidnice to Xero. Standard OAuth flow, takes about two minutes. If you already use Paidnice, skip this step.
2. Go to your Paidnice settings and configure Payment Plans. Decide whether to allow customer self-service in the portal, set the maximum number of instalments you'll accept, and configure any surcharge or establishment fee. These are defaults, and you can override them per plan.
3. Open the Xero invoice you want to set up a plan on in Paidnice. Click the Payment Plans option.
4. Choose instalments, frequency, and fees. Two instalments monthly, six instalments weekly, whatever fits the arrangement. The live preview shows exact dates and amounts.
5. Confirm the plan. The schedule writes to the invoice in Xero and in Paidnice. The customer PDF updates. Reminders are scheduled automatically.
6. Monitor from the Paidnice action queue. You'll see every upcoming instalment and every reminder that's due to fire. If an instalment is missed, the reminder triggers and you get BCC'd.

The whole setup takes under a minute per invoice once your defaults are configured.

When payment plans make sense (and when they don't)

A few practical notes on when to actually offer a payment plan versus just chasing payment in full.

Offer a plan when: the customer has asked for one, the relationship is worth preserving, the invoice is large enough that full payment is a genuine hardship, and you'd rather have certainty on three instalments than uncertainty on a lump sum. This is most trade, service, and professional services work.

Offer a self-service plan proactively when: you have predictable large invoices going out to a broad customer base. Accounting firms with annual fees, consultancies with retainer renewals, and anyone with project deposits over a few thousand dollars all fit. Putting the option in the portal often closes the awkward "can I pay in instalments" conversation before it happens.

Don't offer a plan when: the customer has a history of missed payments, or when the arrangement is just going to drag out a collection you should be escalating. A payment plan is a tool for good-faith customers with cash flow pinches, not a substitute for firmer collections action.

Common questions

Can you set up automatic payments in Xero for a payment plan? Not directly. Xero's automatic payment options route through payment integrations like Stripe or GoCardless, and those services track the schedule separately from the invoice. Using Paidnice payment plans, the schedule lives on the Xero invoice itself, and customers can pay each instalment through whatever payment method you've configured (including automatic direct debit through supported providers).

Can I bulk create payment plans for multiple invoices? Paidnice creates plans per invoice. For bulk offers, the better approach is configuring customer self-service in the portal so any customer can set up their own plan against any eligible invoice without you doing each one manually.

What happens if a customer misses an instalment? The scheduled reminder fires on the due date (or whatever offset you configured), the customer is notified, and you're BCC'd. The invoice in Xero continues to show the outstanding balance, and you can escalate through the rest of Paidnice's reminder and late fee logic the same way you would with any overdue invoice.

Does it work with Xero's online payments? Yes. The payment plan schedule lives in Xero and Paidnice; the payment itself can be collected through whichever payment option you've already set up (Stripe, GoCardless, Pinch, direct deposit, or any of the other Xero payment integrations).

Getting started

If you've been running payment plans from a spreadsheet and want to stop, Paidnice gives you a proper system without making you leave Xero. The plan lives on the invoice, the reminders fire automatically, and you can hand the whole process to your customer portal if you want to remove yourself from it entirely.

For one-off arrangements with a customer in a bind, or for a structured instalment offer on every large invoice you send, this is the fastest way to get it running inside a Xero-based workflow.