Advance payment

What advance payment means

With advance payment the customer pays before delivery, usually by bank transfer to the retailer's account. Goods are dispatched only after payment arrives. For the retailer it is the most risk free payment method there is: the money is in before goods go out, and a default is impossible. In return it is the least convenient method for the customer.

The effort sits with the customer. They have to copy the bank details, initiate the transfer and then wait for delivery without knowing when it comes. Between order and dispatch lies the time the bank needs, which is often one or two working days.

Which customers it suits

• Niche products: with goods available in only a few places, the customer is willing to carry the effort.
• Higher amounts: anyone ordering several hundred euros accepts advance payment more often than with a small basket.
• Made to order goods: where goods are produced specifically, a deposit is common and understandable.
• International customers: in some countries the transfer is the most common payment method of all.

What it costs in revenue

Offered as the only method, advance payment measurably costs sales. Customers drop out when their preferred method is missing, and with small amounts the effort of a transfer exceeds the benefit of the purchase. In practice advance payment is therefore not a replacement but an addition: it stands beside card and invoice payment and is chosen by a small share of customers.

The second cost is the delay. Between order and dispatch lies the bank's processing time, and orders that are not paid stay open. Without automatic checking and reminders that ties up staff, and goods sit reserved without being sold.

What belongs legally

Three points matter. First the statement of when dispatch happens. Because payment has to arrive, the delivery time depends on payment receipt, and that has to be recognisable before the order. Second the period within which payment is due. Without a period an order stays open indefinitely and blocks goods.

Third the handling of unpaid orders. Cancellations should be documented, and reserved goods should be released after the period expires. Without that rule a stock emerges that could have been sold.

When it does harm

Advance payment does harm when it is the only method, when the basket is small and when the audience is used to the credit card. In those cases it costs more sales than it saves in default risk. It makes sense as a fallback for cases where other methods drop out: with conspicuous orders, with customers without a rating history and with goods produced only to order.

Frequent questions

• Is advance payment permitted? Yes, it is an ordinary payment method.
• What if the customer does not pay? Cancel the order after the period and release the goods.
• May I give a discount for it? Yes, that is a common incentive.