Open Account Payment Terms: Selling on Credit Safely

Open account in export: when to sell on credit, how to set credit limits and terms, and how to protect yourself with insurance, guarantees and follow-up.

Open account is how most of the world's trade by value is actually paid: the seller ships, sends the invoice and documents straight to the buyer, and waits for a transfer on the due date. Between established partners in reliable markets, it is fast, cheap and simple. For the exporter, it is also a loan to the buyer, unsecured unless you secure it.

This lesson explains when open account is the right choice, how to set credit limits and write payment terms that leave no room for argument, and which tools turn an open account sale from a bet into a managed risk: credit insurance, standby letters of credit, guarantees and factoring. It ends with the follow-up routine that keeps receivables from becoming bad debts.

If you want to win buyers in Europe or compete with suppliers who already offer 60 or 90 days, you will need to sell on open account sooner or later. The question is how to do it without betting your company on each shipment.

What is open account?

Under open account terms:

1. The seller and buyer agree on the price, the Incoterms® 2020 rule and the credit period, for example 60 days from the bill of lading date.
2. The seller ships and sends the commercial invoice, the transport document and the other documents directly to the buyer.
3. The buyer takes delivery, clears the goods and uses or resells them.
4. On the due date, the buyer orders its bank to transfer the amount.

No bank checks documents or undertakes anything. The seller has given up control of the goods at step 2.

Risk for the seller and the buyer

A late payment is the most common problem, and it is not always bad faith: a buyer's cash shortage, a disputed invoice line, a missing document or a foreign-exchange queue in the buyer's country can all delay payment. Your job is to remove every excuse you control.

When should you sell on open account?

Open account makes sense when most of the following are true:

• the buyer has paid you well before, or credit reports, trade references and its financial statements are solid;
• the buyer's country has no significant foreign-exchange shortage or transfer delays;
• the amount outstanding stays within a credit limit you have set and can afford to lose, or that is insured;
• competitors in your market offer credit terms, so asking for more security would cost you the deal;
• you can finance the credit period, with your own funds or through trade finance.

When some are missing, look at a documentary collection, a letter of credit, or open account with protection behind it.

How do you set a credit limit for a buyer?

A credit limit is the maximum amount the buyer may owe you at any time, all unpaid invoices included. Set it before the first shipment and review it at least once a year.

1. Collect information: company registration, financial statements if available, a credit report from an agency, bank and trade references.
2. Estimate what the buyer will owe at peak: monthly purchases multiplied by the credit period in months, plus a margin for late payment.
3. Compare it with what you can afford to lose and with what your credit insurer will cover on this buyer.
4. Set the limit, write it down, and block new shipments that would exceed it until payments come in.
5. Review it after each late payment, change of ownership or bad news about the buyer or its country.

Writing payment terms that cannot be misread

Vague terms create disputes and delays. A complete open account clause states:

• the amount and the currency;
• the credit period and its starting point, for example "60 days from the date of the bill of lading";
• the payment method and the bank account, with a rule that changes of bank details are valid only if confirmed in writing and by phone;
• who pays bank charges (commonly each party pays its own bank's charges);
• late payment interest, at a stated rate;
• a retention of title clause where useful, keeping ownership of the goods until payment. The CISG does not deal with the transfer of property, so whether such a clause works depends on the national law that applies, usually that of the country where the goods are.

How do you protect an open account sale?

Several tools sit behind open account and come into play only if the buyer fails.

Worked example: semolina products to Lyon and Nouakchott

An Algerian producer of couscous and pasta sells to two distributors.

Lyon distributor: monthly orders of about EUR 40,000, terms 60 days from the bill of lading date, three years of punctual payment. The exporter sets a credit limit of EUR 100,000: two months of purchases outstanding, plus a margin. The receivables are covered by an export credit insurance policy, and the cost of credit is in the price. At a financing cost of 7% a year, carrying EUR 100,000 for 60 days costs about EUR 100,000 x 7% x 60/365 = EUR 1,150.

Nouakchott distributor: new, orders of EUR 25,000, asks for 90 days. The insurer grants only EUR 15,000 of cover on this buyer. The exporter offers 60 days on open account up to EUR 15,000, and above that asks the buyer for a standby letter of credit from its bank. After a year of punctual payment, the exporter will ask the insurer to review the limit.

Following up: the routine that prevents bad debts

1. Before the due date, around 7 days ahead, send a statement listing what falls due.
2. On the due date, check the bank account; if nothing arrived, send a written reminder the next day.
3. After 7 to 10 days, phone the buyer's accounts payable contact, then the purchasing manager.
4. After 30 days, stop new shipments, send a formal notice, and if the sale is insured, check the deadline to declare the overdue to the insurer: policies require notification within a set period and may refuse claims declared late.
5. After the insurer's or your own deadline, hand the file to the insurer or a collection agency.

Is open account allowed everywhere?

Not without conditions. Under Banque d'Algérie Regulation No. 26-02 of 23 July 2026, an Algerian exporter must repatriate export proceeds within 120 days of shipment; a credit period longer than 120 days, up to a maximum of 180 days, must be covered beforehand by export credit insurance with the national authorised insurer, and the payment term must be written in the contract. See repatriation of export proceeds, and confirm the current rules with your bank before granting terms.

Common mistakes

• Granting credit to a new buyer because it "seems serious", with no credit check and no limit.
• Leaving the starting point of the credit period undefined.
• Letting the outstanding grow past the credit limit because "the next payment is coming".
• Forgetting to declare an overdue to the credit insurer in time, and losing the cover.
• Not pricing the credit period: 90 days of credit is a discount you give silently.
• Continuing to ship to a buyer who is already late.

Putting it into practice

On Incoforms, the Finance & debts module records each receivable per client or non-client party, in its currency, with its due date. You can log partial payments as they arrive, and overdue invoices are tracked automatically, so the reminder routine above starts from a reliable list. Multi-currency accounts with exchange rates show the total you are owed in your reference currency.