Open Account
Category: payment
A trade arrangement where the buyer pays after receiving goods, common in trusted relationships.
Open account is a payment term where the seller ships goods and sends documents directly to the buyer, who agrees to pay at a later date (typically 30, 60, or 90 days). This is the most common payment method in international trade (used in over 80% of transactions), but it carries the highest risk for sellers since goods are delivered before payment. Open account terms are typically offered to trusted, long-term business partners.
Examples
- • A German retailer buying from a UK wholesaler on Net 60 open account terms must pay within 60 days of receiving the goods.
- • Open account terms increase seller risk but are competitive for winning business from buyers who prefer deferred payment.
- • Trade credit insurance is commonly used by sellers offering open account terms to protect against buyer default.