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How to Offer Instalment Payments on Xero Invoices
With PaidTerms Capital connected to Xero, an eligible customer can pay an invoice in instalments while you are paid the full amount upfront. Payments and fees post back to your Xero books automatically, so there is no manual reconciliation.
What Is PaidTerms Capital?
PaidTerms Capital is a funded instalment payments platform for NZ businesses. When a customer uses PaidTerms to pay an invoice, PaidTerms pays the supplier the full invoice amount upfront, immediately. The customer then repays PaidTerms over three scheduled instalments.
As a supplier, you raise your invoice as normal. Your customer gets flexible payment terms. You get paid immediately. PaidTerms carries the risk.
What Does the Xero Integration Do?
PaidTerms Capital connects directly to your Xero account via a secure one-click login. Once connected, PaidTerms reads your outstanding invoices, validates payment amounts live from Xero, and posts payments back to your Xero books automatically as each instalment arrives.
You don't need to do anything manually. Xero stays up to date. Your books reconcile themselves.
No double entry. No manual bank rec. No end-of-month catch-up. Every payment and every PaidTerms fee posts to the correct Xero account automatically.
How Do I Connect PaidTerms Capital to Xero?
Connecting takes about 2 minutes. There are no API keys, no developer setup, and nothing technical to configure. You authorise the connection through Xero's standard login screen, the same login you use every day.
Connect your Xero account
From your PaidTerms dashboard, click "Connect Xero." You'll be taken to Xero's standard login screen to authorise the connection. This is a secure, read-and-write OAuth connection, and no passwords are shared with PaidTerms.
Choose your clearing account
Select the Xero bank account where incoming instalment payments should be recorded. This is where PaidTerms posts each payment as it arrives, so your bank rec lines up automatically.
Choose your fee account
Select the expense account in Xero where PaidTerms fees should be recorded. Each transaction fee gets posted here automatically, so your P&L stays accurate without any manual entries.
PaidTerms appears as a payment option on your invoices
PaidTerms registers itself as a payment service in Xero, so a "Pay with PaidTerms" option appears directly on your Xero invoices without any extra work per invoice.
Send your first instalment offer
From your PaidTerms dashboard, choose the invoice and click "Offer instalments." A pre-filled email goes to your customer with the option to pay in instalments, so you do not need to write anything yourself.
What Happens in Xero When a Customer Pays?
When a customer clicks "Pay with PaidTerms" on their Xero invoice and completes their payment plan, here is exactly what happens in your Xero account:
The invoice amount is confirmed live from Xero
When the customer enters their invoice number on the PaidTerms payment page, the amount is pulled directly from your Xero account in real time. There is no risk of a customer entering the wrong amount, since PaidTerms confirms the exact figure from your live invoice.
A payment is recorded in Xero against your invoice
As each instalment is collected, PaidTerms automatically posts a payment to your Xero invoice against your nominated clearing account. Your invoice outstanding balance reduces with each instalment, with no manual entries required.
The PaidTerms fee is posted to your expense account
The platform fee for each transaction is recorded as a bank transaction in your nominated Xero expense account, keeping your P&L accurate.
Xero and PaidTerms stay in sync automatically
If an invoice is updated or paid outside of PaidTerms (for example, a customer pays a different way), Xero notifies PaidTerms immediately. Both systems stay current without any manual reconciliation.
How Is PaidTerms Capital Different From PaidTerms Pro?
Both PaidTerms Capital and PaidTerms Pro connect to Xero and let you offer instalment plans on your invoices. The key difference is who funds the payment, and how deeply Xero is integrated.
PaidTerms Pro
- Customer pays in instalments
- You are paid as each instalment arrives
- Invoice validation from Xero
- One-click offer emails from dashboard
PaidTerms Capital
- You get paid upfront in full
- PaidTerms funds the gap, so you don't wait
- Everything in Pro, plus:
- Automatic payment recording in Xero
- Fee posting to your expense account
- Pay button inside Xero's invoice UI
- Real-time sync between Xero and PaidTerms
PaidTerms Capital Xero Features, Explained
Secure one-click connection
Connects via Xero's standard OAuth login: no API keys, no passwords shared, no developer required. Takes about 2 minutes to authorise.
Live invoice validation
When a customer enters their invoice number, PaidTerms confirms the exact amount from your live Xero account. No manual entry, no mismatched figures, no calls to check.
Pay button inside Xero
PaidTerms registers as a payment service in Xero. A "Pay with PaidTerms" button appears natively on your Xero invoice PDFs. Customers can start a plan without visiting a separate page.
Automatic payment recording
Every instalment is posted to Xero as it lands, against your nominated clearing account. Your invoice balance reduces automatically, with no manual bank rec.
Fee account mapping
PaidTerms fees are posted directly to the expense account you choose in Xero. Your P&L reflects the cost of every transaction from day one, without manual entries.
Real-time two-way sync
Xero notifies PaidTerms instantly when invoices are updated or paid externally. Both systems stay in sync, with no end-of-month catch-up and no manual reconciliation needed.
PaidTerms Capital vs Manual Trade Credit in Xero
Most NZ businesses using Xero still offer trade credit manually: emailing invoices, chasing payments, and doing their bank rec at the end of the month. Here is what that looks like compared to PaidTerms Capital.
| Task | Manual trade credit | PaidTerms Capital + Xero |
|---|---|---|
| When you get paid | 30–90 days after invoice | Upfront, day one |
| Recording payments in Xero | Manual: you do it | Automatic |
| Recording platform fees | N/A | Automatic, posted to your expense account |
| Invoice amount verification | Customer enters manually, errors possible | Pulled live from Xero, always accurate |
| Customer pays from Xero invoice | No | Yes, "Pay with PaidTerms" button in Xero |
| Bank reconciliation | Manual monthly process | Automatic, posted as each instalment lands |
| Chasing late payments | You: phone calls, emails, statements | Not required |
| Bad debt risk | Yours | PaidTerms carries it |
Which NZ Businesses Is PaidTerms Capital + Xero Built For?
PaidTerms Capital works for any NZ business that invoices other businesses in Xero and wants to offer payment flexibility without carrying the risk of trade credit.
It works particularly well if you:
- Invoice other businesses for amounts between $500 and $50,000
- Already use Xero as your accounting software
- Currently offer 30, 60, or 90-day payment terms
- Spend time chasing late invoices or doing manual bank reconciliation
- Want to offer larger order sizes without the cash flow pressure
Common Questions About PaidTerms Capital and Xero
Does PaidTerms Capital work with Xero?
Yes. PaidTerms Capital has a native Xero integration. Once connected, PaidTerms reads your outstanding invoices from Xero, validates amounts live, posts payments to your clearing account automatically, and records platform fees to your nominated expense account, all without any manual input from you.
How do I connect PaidTerms to my Xero account?
From your PaidTerms dashboard, click "Connect Xero." You'll be taken to Xero's standard login screen to authorise the connection. There are no API keys, no developer setup, and no technical configuration required. The connection takes about 2 minutes to complete.
What happens in Xero when a customer pays an instalment through PaidTerms?
Each instalment is automatically recorded in Xero as a payment against the relevant invoice, directed to your nominated clearing account. The invoice outstanding balance in Xero reduces with each instalment. The PaidTerms platform fee for that transaction is also posted to your nominated expense account automatically. You don't need to do anything manually.
Do I need to change how I create invoices in Xero?
No. Keep raising invoices in Xero exactly as you do now. PaidTerms reads your outstanding invoices automatically, and you don't need to tag, flag or export anything. Once connected, the "Pay with PaidTerms" option appears on your Xero invoices without any extra setup per invoice.
Does the "Pay with PaidTerms" button actually appear inside Xero?
Yes. During setup, PaidTerms registers itself as a payment service in your Xero account. This adds a "Pay with PaidTerms" button directly to the Xero invoice your customer receives. They can click it and start a payment plan without needing to visit a separate website or page.
What Xero accounts does PaidTerms post to?
You choose during setup. PaidTerms posts instalment payments to a Xero bank account you nominate (the clearing account), and posts platform fees to an expense account you choose. Both are mapped once during setup and run automatically from then on.
What if a Xero invoice is paid or updated outside of PaidTerms?
Xero sends PaidTerms a notification automatically when invoices are updated or paid, even when it happens outside of PaidTerms. PaidTerms fetches the latest invoice state from Xero and updates its own records accordingly. Both systems stay in sync without any manual action from you.
Does PaidTerms Capital work with multi-currency Xero invoices?
PaidTerms Capital currently supports NZD invoices only. Invoices in other currencies are not eligible for instalment plans.
Is my Xero data safe when I connect PaidTerms?
Yes. PaidTerms connects using Xero's standard OAuth 2.0 authorisation, the same secure login method used by all Xero-connected apps. PaidTerms never stores your Xero password. You can disconnect PaidTerms from your Xero account at any time from your PaidTerms dashboard.
Do I still need to do bank reconciliation at the end of the month?
Not for transactions processed through PaidTerms Capital. Every payment is posted to your Xero clearing account automatically as it arrives. Your reconciliation is up to date in real time, not waiting for a monthly catch-up.
What's the difference between PaidTerms Capital and PaidTerms Pro for Xero users?
Both plans connect to Xero, validate invoice amounts live, and let you send instalment offers. PaidTerms Capital adds automatic payment recording, fee mapping, the "Pay with PaidTerms" button inside Xero, and real-time two-way sync. The key difference is that Capital pays you upfront in full: PaidTerms funds the instalments, not you.
Related Topics
To understand how PaidTerms Pro handles Xero invoices, see PaidTerms Pro Xero Integration. For the full New Zealand process from invoice to repayment, see how business instalment payments work in New Zealand.
To learn what business instalment payments are, see what business instalment payments are. To understand the difference between trade accounts and business instalments, see trade accounts vs business instalments.
For where instalment messaging should appear beyond the invoice itself, see where to display instalment options across the buying journey.
Offer Instalments Through Xero
PaidTerms Capital connects to your Xero account. Eligible customers get flexible payment terms, you are paid upfront, and your books update automatically.
No manual reconciliation. No chasing overdue instalments.
