Purchase on invoice

What purchase on invoice means

With purchase on invoice the customer receives the goods first and pays within a period, usually 14 or 30 days after receipt. For the merchant that means credit to the customer: goods are out, money is not in yet. That is exactly why this method is popular with customers and feared by merchants.

In surveys it regularly takes first place among preferred payment methods, especially for higher priced goods. Anyone not offering it loses purchases to competitors who do. Anyone offering it carries the risk.

Three ways to carry the risk

The first way is to carry it yourself. The shop checks creditworthiness before shipping, handles collections itself and books defaults as a cost. That pays off only with experience and a practised reminder process.

The second way is protection through a provider. A payment provider takes over the invoice purchase, checks the customer, pays the amount to the merchant and carries the default. The merchant pays a per transaction fee and gets predictability in return.

The third way is the combination: invoice purchase for regular customers without a check, protection for new ones. That lowers cost and keeps the convenience for those who pay reliably anyway.

What influences the default rate

• Basket value: as the amount rises, unwillingness to pay grows, not only inability.
• Assortment: with goods that are resold, payment morale drops because the money has not arrived with the customer yet.
• New or returning customer: the difference is considerable. A customer with three paid invoices is a different risk from a first purchase.
• Clarity of the invoice: missing details and an unclear sender delay payment and create enquiries.

What belongs legally

Purchase on invoice does not shift the duties of the right of withdrawal. The customer can inspect and return the goods before paying, so the payment is not a reason for exclusion. Retention of title until full payment is common and sensible. And anyone passing payment data to a provider needs a legal basis and a data processing agreement for it. The credit check itself is permitted only with a legitimate interest and a statement in the privacy policy.

Frequent questions

• Is it mandatory? No, no payment method is prescribed. But customers expect it.
• How long should the period be? 14 days is common, 30 days is friendlier and costlier on defaults.
• How to handle late payers? With clear stages, a friendly reminder, a deadline and a fee. What matters is that the stages run automatically and do not depend on personal chasing.