Glossary term
Open Account
A payment arrangement where goods are shipped and paid for later, on agreed credit terms.
The seller ships and invoices, and the buyer pays within an agreed period. It is the cheapest and simplest arrangement and puts the entire risk on the seller, who has parted with the goods before receiving anything.
It dominates trade between established partners and within groups. Sellers offering it to new counterparties usually manage the exposure with credit insurance or a guarantee rather than by trusting the terms alone.