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Let’s learn more about Open Account. In this payment type the goods are shipped and delivered before the due date, generally in 30-60 days. In this payment method the advantages goes with the importer, but it is a risky option for the exporter. Due to intense competition in the export markets, foreign buyers often recommend exporter for open account term. It is usually suggested if you are dealing for the first time with the foreign Importer, you should ask for the other method of payment like Advance payment or for a letter of credit. This is payment type is not safe for the exporter for the first time, it generally carries when the exporter and importer have a long-lasting relationships in the foreign trade market.
The goods, together with all the necessary documents, are shipped directly to the importer who has agreed to pay the exporter’s invoice at a specified date. The exporter should be absolutely confident that the importer will accept shipment and pay at the agreed time and that the importing country is commercially and politically secure. Open account terms may help win customers in competitive markets and can be used with one or more of the appropriate trade finance techniques that mitigate the risk of non-payment. As global economies become more integrated, it is easier for exporters and importers themselves to access dependable information about foreign-trade partners, and they are less willing to pay for the risk protection afforded by traditional methods.
exporters who are reluctant to extend credit may lose a sale to their competitors. However, the exporter can offer competitive open account terms while substantially mitigating the risk of non-payment by using of one or more of the appropriate trade finance techniques, such as export credit insurance.
