Meaning and transaction use
The US International Trade Administration explains open-account trade as shipment ahead of the payment due date. Its guide discusses financing and instruments such as credit insurance and standby letters of credit as possible supporting techniques. Each arrangement has separate terms and costs. [S1]
Proposed review method: plot the seller's purchase, production, shipment and collection dates on one cash timeline. Identify which amounts remain exposed if the buyer pays late. Keep the customer-credit decision, cash-funding decision and any protection claim process separately documented.
Worked example
Illustrative example only. Assume the seller pays USD 70,000 of costs on shipment day and invoices USD 100,000, due 60 days later. Assume the USD 70,000 is funded at 9% simple annual interest on a 360-day basis.
Scroll the table horizontally to view all columns.
| Case | Funded period | Carrying cost |
|---|---|---|
| Payment on the assumed due date | 60 days | USD 1,050 |
| Payment 30 days late | 90 days | USD 1,575 |
| Additional delay cost | 30 days | USD 525 |
The assumed delay adds USD 525 of funding cost. The invoice remains unpaid until collection. This example excludes taxes, fees, FX effects and losses and is not a calculation of net transaction profit.
Proposed transaction review process
Define the payment trigger
Specify whether the credit period starts at shipment, delivery, acceptance or another event.
Assess the customer
Review the payment record, available credit evidence and requested exposure.
Plan funding
Reconcile the expected collection date with the seller's cash payments and facility availability.
Monitor collection
Track due dates, disputes, overdue balances and escalation actions by invoice.
Evidence checklist
Contract and order
Agreed payment dates, acceptance requirements, currency and dispute provisions.
Performance records
Shipment, delivery or service-completion evidence relevant to payment.
Customer review
Dated credit assessment, exposure limits, ageing and payment history.
Protection and funding
Actual facility, insurance or standby terms, including limits, exclusions and expiry.
Decision framework
| Situation | Proposed action |
|---|---|
| A new buyer requests longer terms | Assess the additional days and amount at risk before approving a limit. |
| Payment depends on acceptance | Assign an owner to obtaining acceptance evidence and resolving discrepancies. |
| A payment becomes overdue | Update the cash forecast, contact the customer through the agreed process and check reporting deadlines in any protection contract. |
| Repeat orders increase exposure | Aggregate unpaid invoices and committed shipments before granting further credit. |
Common errors to check
- Starting the credit clock from a different event than the contract specifies.
- Treating a sale as a cash receipt in the liquidity forecast.
- Assuming financing of the invoice transfers every non-payment risk.
- Ignoring overdue exposures when approving additional shipments.
Connect the sale terms to the cash requirement
Bring the order terms, payment history, shipment schedule and cash forecast to a trade-finance discussion.
Discuss the transactionPrimary references and editorial scope
- International Trade Administration: Trade Finance Guide, Open Account
Open-account payment sequence and examples of supporting trade-finance techniques. Reference checked 17 September 2026.
The cited guide is written for US exporters. Its general payment explanation is used here; no eligibility for US support or particular insurance coverage is asserted. Review tools and figures are illustrative.
General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.
