Invoice payment methods explained

However, there are ways to encourage your vendors to settle their invoices more quickly, and it all comes down to choosing the right invoice payment methods.

Offering a variety of payment options allows the invoice recipient to pay you in the most suitable and convenient way for them, and that increases the chance of prompt settlement. 

In this article, we explain how invoice payments work, the different invoice payment methods you can offer, and how to choose the right ones for your business. 

What is an invoice payment?

An invoice payment is made by a customer or client according to the terms of an invoice issued by your business.

An invoice should include the name and address of both the payer and payee, the amount to be paid, the terms of the payment, and details about the nature of the product or service provided. 

Invoice payment methods

Below, we go into more detail about the best invoice payment methods you can offer. Check out our guide on the difference between push and pull payments if you'd like a refresher on that.

Check

Traditional paper checks are rarely used these days. Compared to many digital payment methods, they are slow and inefficient, as they have to either be sent in the post or delivered by hand. They can also bounce and can easily be cancelled or intercepted by fraudsters

However, some small service-based businesses might prefer to pay by check, or at least not yet have invested in the technology to be able to make digital payments. In these cases, paying by check may be the most suitable option. 

Credit/Debit Card

Cards remain one of the most popular ways to pay worldwide, so they should definitely be included as one of the invoice payment methods you offer. 

You can include instructions for how to pay using a credit or debit card within the invoices you send to clients, and you can even include a link that takes the recipient directly to a secure payment page where they can enter their card details. This makes it very quick and convenient for them to settle the invoice.

The only downside of card payments is that they can incur relatively high transaction fees from payment providers. 

Read more: How to accept credit card payments

Bank Transfer

One of the most direct ways to receive funds from clients is to include your bank account details within the invoice. This allows customers to make a bank transfer or wire transfer straight from their account to yours with minimal intermediaries that can slow down and increase the cost of the transaction. 

Bank transfers are one of the quickest, cheapest, and most secure methods of sending funds and can be a convenient option for international transactions, which can be costly to settle via other methods.

Electronic Funds Transfer (EFT)

EFTs are another way to transfer funds directly from the customer’s bank account to your bank account.

Rather than describing one type of payment, EFT is an umbrella term for multiple payment methods that rely on electronic or online networks. This can include direct debits, credit cards, wire transfers, and eChecks.

The beauty of accepting EFTs as a business is the degree of flexibility they offer, which maximizes the chance that your client will find a suitable option for their needs.

ACH Payment: Automated Clearing House (ACH)

The Automated Clearing House (ACH) is a network used for the electronic transfer of funds between participating financial institutions in the US.

Using this network, your clients can make direct electronic payments from their bank to yours within three working days. They can authorize you to withdraw the funds on a particular date, such as their pay day. This creates trust by giving you assurance of knowing when you will receive the owed amount, while they don’t have to worry about not having enough money to settle the invoice

ACH payments are an accessible, secure, and convenient way to settle invoices. And, because they don’t have to rely on card schemes like Mastercard and Visa, ACH payments are very affordable. However, they are a little slower than methods like bank transfers or wire transfers.

Another advantage of ACH is that, as a ‘pull’ payment method (which means that the business is responsible for initiating the transaction), you retain greater control over when and how you get paid. 

Mobile Payment Apps

Mobile payment methods, and especially digital wallets like Apple and Google Pay, are booming. They allow users to store card details on their phone, which they can then use to make secure online payments. As with card payments, you can include a link within your invoices that takes the recipient straight to a secure payment page. 

The great thing about mobile payment processing is that it offers maximum convenience to your clients, ensuring that invoices are settled promptly.

Online Payment Platforms

There are many online payment solutions that you can use to collect invoice payments, such as PayPal, one of the world’s most widely used payment platforms. They facilitate multiple payment methods, including cards, mobile wallets, and even installment options.

These platforms come with a range of tools that make it even quicker and easier to get paid, including invoice creation tools that you can use on both desktop and mobile, allowing you to issue personalized, professional-looking invoices on the go. You can also set up automatic reminders so that you can keep on top of late payments.

Learn more: What is a consolidated invoice?

How to choose the right invoice payment method

The great thing about issuing invoices is that, by preferentially including certain options within the invoice, you can gently nudge the recipient to use the method (or methods) that are best suited to your needs, as long as by doing so you don’t impact your relationship with the client.

With that in mind, when choosing which invoice payment methods to offer, you should consider the following factors:

• Speed - how long will it take the funds to be settled in your account after the payment has been initiated? Quicker methods can be better for cash flow management, so if this is an issue for you, encouraging your clients to pay via bank transfer might be the way to go 
• Fees - while the cost of each payment should certainly be a factor, it has to be weighed against other considerations like convenience. For example, card and digital wallet payments can incur high fees, but they’re so widely used that not offering them could do more harm than good. If your priority is to reduce the cost of accepting invoice payments, low-cost methods like bank transfers and ACH payments should be your preferred options
• Security - security should be a primary concern, regardless of how it impacts other factors. Your payment methods should actively reduce the risk of funds or data being stolen during the transaction. Fortunately, most online payment methods employ highly effective security measures like encryption, multi-factor authentication, and tokenization. Paper checks are probably the least secure of the methods listed above
• Practicality - again, paper checks are the least practical method, but what about the practicality of other methods? You should consider how much time and effort it requires to collect payment via each method. For example, merchant-initiated methods like ACH debits do give you more control, but they require more input from you in comparison to customer-initiated methods like card payments
• Client preferences - it’s worth asking individual clients how they prefer to settle invoices, especially if you have or are expecting to have an ongoing business engagement. Meeting their preferences will result in more prompt payments and more productive relationships

Find the right payment method for invoicing with Checkout.com

Take the hassle out of deciding which invoice payment methods to offer by partnering with Checkout.com. 

Our modular, integrated platform allows you to switch on dozens of popular payment methods, from globally accepted options like card payments to niche, local alternative methods. 

Discover business payment methods that will allow you to achieve your goals, boost revenue and loyalty, and improve customer experience with Checkout.com.Sending an invoice is the first step to getting paid, but often, the speed of that payment is out of your hands, and late payments can cause real problems for cash flow and forward planning.