How to Handle Partial Payments on Invoices: Track, Confirm and Follow Up

A partial payment is a payment of less than the invoice total. When one arrives, record it against the right invoice, work out the remaining balance, confirm both with the client in writing, and follow up on the rest by a clear date. The invoice stays open until the full amount is paid.

Billed publishes this page. This is general information, not legal or tax advice.

First, find out why the client paid part

• Planned: your contract or a written arrangement splits the payment.
• A mistake: the client paid the wrong amount or missed a line.
• A dispute: the client is holding back part of the invoice over a specific charge.
• Cash flow: the client can't pay it all now.

Ask before you assume. Your next step depends on the reason, and your payment terms are the starting point for the conversation.

Record and apply the payment

1. Record the payment against the invoice it pays, with the date, amount and method.
2. Work out the remaining balance: invoice total minus all payments to date.
3. If one payment covers several invoices, ask the client which invoices it pays, and apply it that way. If they don't say, follow a written policy you apply the same way each time, such as oldest invoice first.
4. Keep the invoice open until the balance is zero. Don't mark it paid early.

Confirm in writing

Send the client a short note after each partial payment. For example:

Thanks for your $2,000.00 payment on June 12 toward invoice INV-1042. The remaining balance is $2,800.00, due June 30.

Include the invoice number, the amount you received, the remaining balance, the due date and how to pay.

Worked example: tracking one invoice to zero

The business and figures here are a sample, invented for this example.

Invoice INV-1042 is for $4,800.00, due June 30.

1. June 12, check for $2,000.00: $4,800.00 − $2,000.00 = $2,800.00 remaining.
2. June 28, card payment of $1,500.00: $2,800.00 − $1,500.00 = $1,300.00 remaining.
3. July 10, final payment of $1,300.00: $1,300.00 − $1,300.00 = $0.00. The invoice is now paid.
4. Check: $2,000.00 + $1,500.00 + $1,300.00 = $4,800.00, the invoice total.

From July 1, the remaining $1,300.00 was past the June 30 due date, so it was the balance to follow up on until the final payment arrived.

Disputed amounts

If the client is holding back part of an invoice over a specific charge, ask which line they're disputing and why, in writing. Agree on how it's resolved, for example by fixing the line or issuing a credit for an amount you both accept, and follow up on the undisputed balance as normal.

Late fees on the remaining balance

If your contract provides for late fees, decide whether and how they apply to an unpaid balance after a partial payment, and apply that the same way for every client. Rules on late fees vary by place, so check local rules and ask a lawyer before you charge one.

Taxes and your books

How a partial payment affects when you report income, and any sales tax on the invoice, depends on your accounting method and where you work. Ask your accountant.

Where Billed fits

Billed's invoice software page says you can "see which invoices are paid, partly paid or past due," and that "Invoice reports show which invoices are paid, partially paid or past due, and you can see who owes you money and send them a payment reminder."

The same page also describes recording offline payments. The invoice software page says, "When a client pays by check or cash, record it as an offline payment so all your income is in one place," and "After a client pays, you can send them a payment receipt." It also says, "Billed keeps the complete history of an invoice and its payments from the moment it is created." For paying online, see accepting payments.

More ways to keep balances clear

• Show payments on the invoice you resend: original total, payments to date and the balance due. Billed's invoice templates and invoice generator are places to start your layout.
• Watch for overlap with recurring invoices: if a client still owes part of last month while this month's invoice goes out, decide whether new work continues and say so in your contract.
• Review open balances every week, and follow up on anything past due.

Related articles

• Invoice Payment Terms Explained
• Guide to Deposit Invoicing
• How to Track Invoices Effectively
• What Is Accounts Receivable?

Frequently Asked Questions

What is a partial payment on an invoice?

A payment of less than the invoice total. The invoice stays open, with the remaining balance still due, until the full amount is paid.

How do I record a partial payment?

Record it against the invoice it pays, with the date, amount and method, then work out the remaining balance. In the sample, a $2,000.00 payment on a $4,800.00 invoice leaves $2,800.00.

What should I tell the client after a partial payment?

Confirm the invoice number, the amount you received, the remaining balance, the due date and how to pay, in writing.

Can I charge a late fee on the unpaid balance?

It depends on your contract and the rules where you work. Late-fee rules vary by place, so check local rules and ask a lawyer before you charge one.

What if one payment covers several invoices?

Ask the client which invoices it pays and apply it that way. If they don't say, follow a written policy, such as oldest invoice first, and confirm what you did.