What are invoice payments?
Invoice payments let your customers pay a bill online — by card, open banking bank transfer or direct debit — straight from a link or button on the invoice itself.
Instead of printing bank details and hoping the customer types them in correctly, the invoice carries a secure pay-now option that reconciles the payment back to the invoice automatically.
For most UK small businesses this is the single quickest way to shorten debtor days, because it removes the friction between the customer deciding to pay and the money actually moving.
How does it work?
You raise the invoice in your accounting software or in the provider's dashboard. A pay-now link is attached automatically.
The customer opens the invoice, chooses card or bank transfer, and pays in a few taps. Funds settle to your account, usually next working day, and the invoice is marked as paid without anyone touching a spreadsheet.
Here's a fictional example:
Meet Emily's Web Design Studio
Emily runs a web design studio in Manchester. Her clients are reliable but slow — most invoices sit for 30 to 45 days before anyone gets round to setting up the transfer.
In July she invoices a client £10,000 on 30-day terms. Previously that meant chasing emails at day 21 and day 30.
This time the invoice has a pay-now button. The client's finance manager pays by open banking transfer the same afternoon it lands.
Emily pays a fee of around £2 on that payment and receives £9,998 the next morning — twenty-nine days earlier than before, with no chasing.
What are the different ways customers can pay an invoice?
Card payments
The most familiar option for customers, accepted on any device and useful when the payer wants the buyer protection or the credit line a card gives them.
Cost is typically 1.4% to 2.9% plus around 20p per transaction, so cards suit smaller invoices where speed matters more than the fee.
Open banking bank transfer
The payer is taken straight into their own banking app with the amount and reference pre-filled, so there's nothing to type and nothing to get wrong.
Fees are usually a flat 20p to £1 regardless of invoice size, which makes this by far the cheapest option on large invoices. Money arrives in seconds via Faster Payments.
Direct debit
Best where the same customer is invoiced repeatedly. You collect on the due date automatically rather than waiting for the customer to act.
Costs around 1% capped at £2 to £4 per collection, and dramatically improves predictability for retainers and recurring work.
Is invoice payment right for my business?
Here are some examples of businesses that benefit most from taking invoice payments online:
- 1
Agencies and consultancies
High-value invoices on 30-day terms where a single week's improvement in payment time meaningfully changes the cash position.
- 2
Trades and contractors
Work is done on site and the invoice follows. A pay-now link on the phone gets the customer to settle before they leave the driveway.
- 3
Wholesalers and B2B suppliers
Repeat customers on account terms, where direct debit and open banking together remove almost all manual reconciliation work.
What do I need to start taking invoice payments?
Providers keep onboarding light, but they will usually ask for:
Business details: Company registration number or sole trader details, trading address and a description of what you sell.
A business bank account: Settlement goes to a UK account in the business name. Personal accounts are usually refused.
Identity verification: Photo ID and proof of address for directors and anyone owning more than 25% of the business.
Expected volumes: Monthly turnover and average invoice value, which determine pricing and any settlement holds.
Accounting software (optional): Xero, QuickBooks, Sage or FreeAgent connections let invoices and payments reconcile automatically.
How to compare invoice payment providers
Here are the things worth checking before you commit:
- 1
Cost per payment method
A provider can look cheap on cards and expensive on bank transfers, or the reverse. Model your real invoice mix — ten £5,000 invoices a month costs wildly different amounts at 1.9% versus a 30p flat fee.
- 2
Settlement speed
Next working day is the standard to aim for. Some providers hold funds for three to seven days on new accounts, which cancels out much of the cashflow benefit you signed up for.
- 3
Reputation and support
Read reviews from businesses your size, and check how the provider handles disputes, failed payments and account freezes. A provider with strong reviews but no phone number is a risk when a large payment goes missing.
Benefits and drawbacks of invoice payments
Pros
- Invoices get paid days or weeks sooner
- Automatic reconciliation saves admin time
- Fewer payment errors and wrong references
- Professional experience for customers
Cons
- A fee is taken from every payment
- Card fees eat into margin on large invoices
- Some customers still insist on manual transfer
- Chargebacks are possible on card payments
Why choose invoice payments over invoice finance?
Invoice payments speed up how quickly a customer can pay you. Invoice finance advances money against invoices that haven't been paid yet, at a cost.
If your problem is friction — customers who intend to pay but take weeks to get round to it — invoice payments fix it for pennies. If your problem is genuinely long payment terms you can't renegotiate, finance is the tool.
Plenty of businesses use both: pay-now links on every invoice, and a finance facility held in reserve for the quarter when a large customer stretches out.
What if a customer still doesn't pay?
Online payment options remove excuses but not intent. Keep a credit control routine: clear terms on the invoice, a reminder at day seven, a call at day fourteen.
Automated reminders from your provider or accounting software carry the pay-now link with them, so each nudge is one tap away from being settled.
For persistent non-payers, statutory interest under the Late Payment of Commercial Debts Act and, ultimately, a letter before action remain your backstop.
What are the alternatives to online invoice payments?
If online invoice payments don't suit your customers, consider:
Direct debit
You collect on the due date rather than waiting for the customer to act. Ideal for retainers and repeat billing, though it needs a mandate set up in advance.
Card machines and payment links
Useful when you're in front of the customer, or when you want to take payment over the phone without issuing a formal invoice first.
Bank transfer on terms
Free, but slow and manual. Fine for a handful of large trusted accounts, painful once you're issuing dozens of invoices a month.
FAQs
About this guide
Written and reviewed by the Grow Your Business team, and kept up to date as rates, rules and provider terms change.
Ready to compare?
Tell us about your business once and we'll match you with providers that fit — it takes a couple of minutes and costs nothing.
Get started