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An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

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Partial Pay

What Does Partial Payment Mean?

Partial payment means a payment that is less than the full amount due. Other terms for partial payment include part payment, installment payment, down payment, or upfront payment.

Partial pay can occur in many different situations, including:

  • Service Orders: Partial payments are made when a service order is placed and the rest of the payment is delivered after service completion, such as for contractors. This helps to motivate the service supplier to complete work on time and as expected. It also helps guarantee payment from a customer.  

  • Installment Accounts: A specific amount of money is borrowed and set payments are made on the account. Common examples are car loans and large appliance purchases.

  • Revolving Accounts: A borrowed amount up to a specific limit with payments varying depending on how much is borrowed. Credit cards and home equity lines of credit are examples of revolving accounts.

  • Real Estate Deal: Buyers make an upfront payment that goes toward the whole property value. The remaining balance is fulfilled through a mortgage loan. 

  • Business Takeovers and Mergers: Partial pay is agreed upon and issued as a security measure on the buyer’s side. This allows the buyer to withhold the remaining sum of money to offset negative circumstances affecting the company being purchased.

What Are the Benefits of Partial Payments?

The benefit of partial payments for customers is that they allow them to be in control of some of the money to motivate a service provider to complete work as expected. The benefit for businesses for utilizing partial pay is that it allows for security against unforeseen circumstances that may affect the customer’s end of the transaction.

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How Do I Invoice a Partial Payment?

There are two primary ways to invoice a partial payment against an invoice:

  1. When invoice payments are recorded manually, most software will allow you to indicate an invoice is partially paid (or even automatically determine this because of the disparity between the full amount and what was paid).

  2. When customers make an online payment, your ecommerce system should indicate that there is still a balance due. Allowing a customer to make a partial payment is up to the discretion of the creditor.

Examples of Invoice Terms for Partial Payments

There are a few ways that partial payments can be worded on an invoice. 

Here are a few examples:

  1. “50% deposit, balance due on delivery”

  2. “50% due upon receipt of invoice”

  3. “50/50”

  4. “Net 50”

  5. “Minimum payment due”

  6. “Remaining balance due in 60 days”

  7. “Monthly payment due on April 1, 2020”

  8. “1% 10 Net 30”

  9. “Contra Payment”

Note that it is very important that all payment terms are listed clearly and fully explained on every invoice to avoid customer confusion and to pass payment liability to the customer.

Is a Partial Payment Considered Late?

A partial payment is not considered late if it was agreed upon by the creditor and payee in a signed contract. This can be the case with installment plans, grace periods, etc. The key thing here is communication and an understanding of terms. Many businesses have ways of working with customers who are behind if the customer reaches out to work out a solution, and may not consider a partial payment late in certain circumstances.

A partial payment is considered late if it is made after the due date or grace period and it is not written into the contract terms. This is especially the case if there has been no communication of allowing for any exceptions between creditor and payee.

Making a partial payment that is considered late may incur:

  • Late fees

  • Higher interest rates

  • Bad marks on the customer’s credit report

  • A disruption in service

  • Repossession of purchases

  • Other possible penalties 

What Is Partial Redemption?

Partial pay of a callable or redeemable bond (a bond that may be redeemed by the issuer before its date of maturity) is called a partial redemption. A partial redemption may happen if corporate or municipal issuers want to issue new bonds at lower rates to save money on expensive interest. 

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