Open account transactions in international trade mean the goods are delivered and shipped before the payment is due. It usually happens between thirty, sixty or ninety days. This option benefits importers as it allows cash flow but is not preferred by exporters. The heavy competition in exports makes foreign buyers demand exporters to make open accounts. Another important aspect is that the extension of credit is ubiquitous to happen in an open account. Exporters lose more potential customers to their competitors mainly because of this. Open account enhances competitiveness and makes the business owner examine economic, commercial and political risks. It also teaches exporters to analyze the cultural influences to ensure they receive their payment on time.
An open account transaction is a sale where the shipped goods are delivered before the payment is due. It is advantageous to importers as they experience a good cash flow. But it is a great risk for exporters. The competition in exports make buyers pressure the exporters for open account transaction, and it is prevalent abroad to extend the seller’s credit to the buyer. Usually, exporters who do not want to risk extending credits lose their customers to competitors. But exporters can provide a competitive open account by mitigating non-payment risks and using export credit insurance.