Last reviewed 13 August 2026
Work out the installment amount, the total cost and the full schedule for any payment plan, weekly to quarterly, with or without interest.
A payment plan splits one balance into scheduled installments. Take off any down payment, then divide the rest across the installments, adding interest per period if the plan charges it.
Example: a $12,000 invoice with $2,000 down, over 12 monthly installments at 6 percent a year. The financed amount is $10,000, so the payment is $860.66 a month, and total interest is $327.96.
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Enter a total above zero.
The down payment must be less than the total.
Enter between 1 and 600 installments.
This payment is too small to ever clear the interest. Raise it.
Enter a rate between 0 and 100 percent.
Enter a valid first payment date.
Each row shows how much of the payment clears principal, how much is interest, and what is left. The final payment is adjusted to clear the balance exactly.
| # | Due | Payment | Principal | Interest | Balance |
|---|
Estimates using the standard amortization formula. Taxes, plan fees and late payment charges are not included.
Key takeaways
Payment per month
$860.66
12 monthly installments is a standard business plan length.
Paidnice runs customer payment plans end to end in Xero and QuickBooks.
No card required.
A payment plan is not a discount and it is not a write off. It is a decision to be paid in full, more slowly, in exchange for being paid at all.
For a business, that decision usually arrives on one invoice a good customer cannot pay this month. The options are narrow:
The same arithmetic runs the consumer side. A purchase split over weekly payments, a layaway on goods held until the last payment, a tax installment agreement: each is one balance divided by a number of periods, with or without a rate per period.
What changes is the principal, the rate, the number of installments and how often they fall due. The formula does not change at all.
The quick version. Take the down payment off the total, then divide what is left by the number of installments. If the plan charges interest, apply the rate to the balance each period and the payment rises a little.
Most business payment plans charge no interest at all, and those need nothing more than Payment = P / n: the financed amount divided by the number of installments. Once a rate is attached, the standard amortization formula takes over: Payment = P x [ r(1+r)^n / ((1+r)^n - 1) ]. Four inputs, and three of them are commonly entered wrong.
The total minus any down payment, not the total. A 12,000 dollar invoice with 2,000 down finances 10,000. Getting this wrong is the most common error, and it overstates every payment in the schedule.
Divide the annual rate by the number of payments a year: 12 for monthly, 26 for fortnightly, 52 for weekly, 4 for quarterly. Six percent a year on a monthly plan is 0.005 per period. Feeding the annual rate straight in produces a payment roughly twelve times too punishing.
The count of payments, not the number of months. Twenty six fortnightly payments is one year, not twenty six. Match n to the same period as r or the answer is meaningless.
When r is zero the formula divides by zero, so it does not apply. Use Payment = P / n instead. Most short business plans are zero interest, so this is the branch that runs most often.
A supplier agrees to let a customer clear a 12,000 dollar invoice over 12 monthly installments at 6 percent a year, with 2,000 dollars paid up front.
The first payment carries 50 dollars of interest, because 10,000 x 0.005 is 50, and 810.66 of principal. By the final payment almost all of it is principal. That is the whole shape of an amortization schedule: the interest share falls every period as the balance falls.
Drop the rate to zero and the payment becomes 10,000 / 12, or 833.33 a month, and the customer pays exactly 12,000. The 6 percent version costs them 327.97 more. That gap is what you price when you decide whether to charge interest, and on a plan this short it is rarely worth the conversation.
The payment amount matters less than the plan length. Length is what determines whether the plan gets paid, because a longer plan means more chances for the customer's circumstances to change.
Up to 3 months
Short recovery
A cash timing problem, not a credit problem. Zero interest, minimal admin, low default risk.
3 to 6 months
Standard business plan
The normal shape for a large invoice. Usually zero interest, usually with a down payment.
6 to 12 months
You are financing them
Your working capital is funding their purchase. Price it, take a deposit, document it properly.
Over 12 months
This is a loan
Raises licensing, interest rate and documentation questions in most jurisdictions. Take advice first.
Test the length against the size of each payment too. If an installment is more than about a fifth of what the customer normally spends with you in a period, the plan is asking for a behavior change rather than a schedule, and it will break.
The same formula governs every one of these. Seeing them side by side is the fastest way to build a feel for what rate and term do to a payment.
| Scenario | Amount | Rate | Term | Payment | Total interest |
|---|---|---|---|---|---|
| B2B invoice plan, interest free | $5,000 | 0% | 6 mo | $833.33 | $0.00 |
| B2B plan with a finance fee | $10,000 | 8% | 24 mo | $452.27 | $854.55 |
| Tax installment agreement | $8,000 | 8% | 12 mo | $695.91 | $350.90 |
| Personal loan, good credit | $15,000 | 12% | 36 mo | $498.21 | $2,935.75 |
| Auto loan, new vehicle | $25,000 | 6% | 60 mo | $483.32 | $3,999.23 |
| Credit card payoff | $5,000 | 22% | 24 mo | $259.39 | $1,225.38 |
Each row computed with the standard monthly amortization formula, payment rounded to the cent, interest taken as the rounded payment across the term less the principal. Illustrative amounts and rates, not offers.
The same principal produces wildly different totals depending on rate and term, which is exactly why the calculator above beats a rule of thumb.
| Plan type | Typical annual rate | Notes |
|---|---|---|
| B2B customer payment plan | 0 to 8% | Usually 0% on plans under six months, to protect the relationship |
| Early payment discount, implied | 18 to 37% | The cost the buyer pays by not taking 1/10 or 2/10 Net 30 |
| US tax installment agreement | Set quarterly | Federal short term rate plus 3 points, plus penalties |
| Personal loan, good credit | 6 to 12% | Unsecured, priced on credit score and term |
| Credit card balance | 18 to 30% | Higher again on cash advances and penalty rates |
| Auto loan, new, good credit | 4 to 8% | Secured against the vehicle |
Compiled from published lender and card issuer rate disclosures and from the US federal underpayment rate rule at Internal Revenue Code section 6621, which sets the tax installment rate as the federal short term rate plus 3 percentage points, adjusted quarterly. Reviewed August 2026. Orientation only, not quotes, and rates move. Check the current figure before you put one in an agreement.
Most calculators only answer the first of these. The second is the one that actually comes up in a negotiation.
| You know | You want | Method |
|---|---|---|
| The number of installments | The payment amount | Amortization formula, or PMT in a spreadsheet |
| What the customer can pay | How many installments it takes | Solve for n, or NPER in a spreadsheet |
Solving for the count is the honest way to structure a plan. The customer already knows what they can afford each month and is usually reluctant to say it first. Ask the number, put it in, and the schedule tells you both whether the answer is six installments or twenty six.
On a zero interest plan it is the balance divided by the payment. With interest, the payment has to exceed the interest charged in the first period or the balance never falls, which the calculator flags rather than returning a nonsense answer.
The trap in longer plans. Halving the payment always more than doubles the interest, because the balance stays high for longer and interest is charged on the balance. A longer plan is not a smaller cost, it is the same cost spread thinner plus a premium for the extra time.
Offer one when the customer has paid reliably before and the real alternative is collections. Decline when they have already broken a plan, or when nothing visible is funding the installments.
Almost every avoidable cost in a plan comes from stretching the term or pricing it badly.
Plans fail in the tracking, not in the arithmetic. Eight steps keep one on schedule.
Paidnice Payment Plans handles proposal, acceptance, scheduled invoices, reminders and default handling inside Xero and QuickBooks.
See payment plansExcel and Google Sheets have the whole formula built in. Rate goes in first, and it must be the rate per period.
=PMT(0.08/12, 24, -10000) returns 452.27=NPER(0.08/12, -500, 10000)=10000/12, no PMT needed=IPMT(0.08/12, 3, 24, -10000)=PPMT(0.08/12, 3, 24, -10000)=PMT(0.08/12,24,-10000)*24-10000=EDATE(A2,1)=A2+14Why the negative sign. Spreadsheet finance functions treat money paid out and money received as opposite signs, so entering the principal as a negative makes PMT return a positive payment. Without it the answer is right but reads as minus 452.27.
A plan answers what the installments are. These four answer the questions on either side of it.
| Tool | Question it answers | Output |
|---|---|---|
| Payment plan | What are the installments and what does the plan cost | A schedule |
| Net 30 | When was this invoice due in the first place | A date |
| Late payment interest | What is owed on the overdue balance right now | Interest amount |
| Bad debt expense | What to provide for if the plan fails | Provision and journal |
| Invoice factoring | What selling the receivable costs instead | Effective cost |
The comparison worth making before you offer a plan is against factoring. A plan costs you the time value of the money and the default risk. Factoring costs a fee but hands you the cash now.
If the invoice is large and your own cash is tight, run both numbers before you commit to waiting six months.
Businesses on Xero and QuickBooks can run the whole arrangement automatically, from the proposal through to the missed payment notice, with Paidnice payment plans.
Subtract any down payment from the total to get the financed amount, then divide by the number of installments for a zero interest plan. With interest, use the amortization formula: Payment = P x r(1+r)^n / ((1+r)^n - 1), where P is the financed amount, r is the rate per period and n is the number of payments. Convert an annual rate to a period rate by dividing by the payments per year.
A payment plan is a written arrangement to settle one total in scheduled parts instead of one payment. In business it usually means letting a customer clear a large invoice over three to twelve installments rather than writing it off or sending it to collections. The plan sets the amount, the number of installments, the dates, any interest, and what happens if a payment is missed.
Work backwards from what the customer can actually pay each period, not from a round number. Set the installment at a level their cash flow supports, then let the arithmetic give you the count. For business invoice plans, three to twelve monthly installments is the normal range. Past twelve months a plan starts to behave like a loan, which raises licensing and documentation questions.
For an interest free plan, divide the amount owing by the number of weeks. A 5,200 dollar balance over 26 weekly payments is 200 dollars a week. If interest applies, divide the annual rate by 52 to get the weekly rate before applying the amortization formula. Weekly plans collect faster and default earlier, which is useful: you find out sooner.
Layaway splits the price into installments paid before the goods are handed over, so the seller holds the item and carries no credit risk. The arithmetic is a zero interest plan: price minus deposit, divided by the number of installments. Set the calculator to 0 percent, enter the deposit as the down payment, and the schedule shows each payment and the date it is due.
Offer one when the customer has paid reliably before and is facing a temporary cash problem, when the invoice is large relative to their normal spend, and when the alternative is collections. Decline when the account has already broken a plan, when the invoice is in dispute, or when there is no clear revenue source funding the installments. A down payment is the fastest test of intent.
Add the cycle length to the last billing date. Weekly cycles add 7 days, fortnightly 14, monthly one calendar month, quarterly three months. Monthly cycles dated on the 29th, 30th or 31st roll back to the last day of shorter months. The schedule in the calculator above applies the same rule, so the dates match what your accounting system will generate.
A payment schedule is the row by row list of every installment in a plan: the number, the due date, the amount, how much of it clears principal, how much covers interest, and the balance left afterwards. It is the document both sides agree to. Without one, a plan is a verbal understanding, and verbal understandings are what collections disputes are made of.
For plans of six months or less, zero percent is normal and the goodwill is usually worth more than the interest. Beyond six months you are financing the customer with your own working capital, so a modest rate of 4 to 8 percent to cover your cost of capital is reasonable. Charging much more than that turns a recovery plan into a lending product.
Decide this before the plan starts and write it into the agreement. The common structure is a short grace period of about five days, then a late fee and a formal notice, then acceleration of the whole remaining balance after two missed payments. Plans fail quietly when nobody is watching the schedule, so a missed payment needs to trigger something automatically.
Use PMT. For 10,000 dollars at 8 percent over 24 monthly payments, enter =PMT(0.08/12, 24, -10000), which returns 452.27. Use NPER to solve the other way: =NPER(0.08/12, -500, 10000) returns the number of payments if you can pay 500 a month. For a zero interest plan, skip PMT and divide the financed amount by the number of installments.
Divide the annual rate by 12 to get the monthly rate, then apply Payment = P x r(1+r)^n / ((1+r)^n - 1). For a 10,000 dollar loan at 8 percent over 24 months, r is 0.006667 and n is 24, so the payment is 452.27 a month. With no interest it is simply P divided by n, or 416.67 a month over 24 months. The calculator above also handles weekly, fortnightly and quarterly schedules.
It depends entirely on the rate and the term. At 0 percent over 12 months it is 833.33 a month. At 5 percent over 24 months it is 438.71. At 8 percent over 36 months it is 313.36. At 10 percent over 60 months it is 212.47, and that last one costs 12,748 in total, so the low monthly payment carries 2,748 of interest. A longer term is a smaller payment and a larger bill.
At a 26.99 percent annual rate on a 5,000 dollar balance: 480.06 a month clears it in 12 months with 760.72 of interest; 271.88 a month takes 24 months and 1,525.12 of interest; 204.10 a month takes 36 months and 2,347.60; 152.65 a month takes 60 months and 4,159.00, which is close to the balance itself. Paying above the minimum is what shortens this.
Twelve percent is normally an annual rate, so a monthly plan uses 1 percent per period. On a 10,000 dollar balance that is 888.49 a month over 12 months with 661.88 of interest, 470.73 over 24 months with 1,297.52, 332.14 over 36 months with 1,957.04, and 222.44 over 60 months with 3,346.40. Twelve percent sits at the top of good credit personal loans and the bottom of card rates.
It is expensive, and it usually signals that the lender is treating the borrower as higher risk. For context, prime cards run roughly 15 to 22 percent, sub prime cards 25 to 36 percent, and good credit personal loans 6 to 12 percent. For a B2B customer payment plan, 34.9 percent is far outside the norm, which is 0 to 8 percent, and a rate that high is a sign the answer should be a larger down payment or no plan.
The interest rate is the cost of borrowing the principal. The APR is the interest rate plus fees such as origination or application charges, annualized. With no fees the two are the same. With 500 dollars of fees on a 10,000 dollar loan the APR is noticeably higher than the stated rate. Compare offers on APR, and if you want to model an APR here, enter the APR figure as the rate.
The balance is replaced by a schedule of smaller invoices, one per installment, each dated for its own due date and sent automatically. Reminders go out ahead of each date, a missed installment triggers a late fee and an escalation, and the receivable is settled and reconciled on the final payment. Running that by hand is where plans fail, which is what Paidnice payment plans automate inside both systems.
Paidnice is accounts receivable automation that enforces your payment terms, trusted by thousands of businesses on Xero and QuickBooks. Credit control and debtor management, run for you.
INV-434
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