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Open account is the payment term buyers prefer and sellers carry. Sellers manage the risk with credit insurance, receivables finance and, where both sides agree, a bank payment obligation or a standby letter of credit.
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01 · Definition
Open account means the seller ships and invoices, and the buyer pays on the due date
In an sale, the seller ships the goods first. The buyer pays later, on an agreed . That date is typically 30, 60 or 90 days away, according to the US International Trade Administration's Trade Finance Guide, published in July 2022.
The time between shipment and payment is the , or term. During that time the seller is owed money. In effect, the seller is giving the buyer credit.
No bank checks documents or promises to pay. The seller sends the invoice and shipping papers straight to the buyer. That is the main difference from a , where a bank promises to pay against the right documents.
Open account belongs to a wider group called : credit that one firm gives another directly, with no bank in the middle. The BIS Committee on the Global Financial System (CGFS) places open account in this group and calls inter-firm trade credit the main alternative to bank trade finance, in its January 2014 paper on trade finance. Our instrument card on open account sets out the structure in brief.
02 · Risk
The seller carries the buyer's payment risk for the full term
Open account is good for the buyer and risky for the seller. The ITA's Methods of Payment page calls it one of the most advantageous options for the importer and one of the highest risk options for the exporter.
The reason is simple. The buyer has the goods before it pays. If it does not pay, the seller has already given up the goods. This is : the risk that the buyer cannot or will not pay. Cross-border sales add : events in the buyer's country that stop payment.
"Substantial risk to the exporter because the buyer could obtain the goods"
US International Trade Administration, Trade Finance Guide, July 2022
So when does open account make sense? The ITA recommends it for low-risk trading relationships or markets, and for competitive markets where sellers need to win customers. For higher risk deals, or new and less-established relationships, the ITA recommends letters of credit instead. Its risk ordering places open account at the exporter's end of the spectrum, the opposite end from . Our guide to the payment terms spectrum compares all four methods.
03 · Protection
Credit insurance and standbys move part of the risk off the seller
A seller can protect an open account sale in two common ways. It can insure the payment, or it can ask the buyer for a bank standby.
pays the seller if a foreign buyer does not pay. The ITA's Export Credit Insurance page says it lets exporters offer competitive open account terms while minimizing non-payment risk. provides 90 to 95 percent cover. It typically covers consumer goods, materials and services up to 180 days, and small capital goods, consumer durables and bulk commodities up to 360 days.
The Export-Import Bank of the United States (EXIM) gives one public example. Its Export Finance Solutions Guide of March 20, 2026 describes a one-year renewable short-term policy. It covers 95 percent of commercial and political nonpayment and generally covers terms of up to 180 days.
The second tool is a . This is a bank promise the seller can call on only if the buyer fails to pay. The ITA notes that asking for a standby as a condition of open account terms greatly improves the buyer's cash flow while reducing the seller's risk of non-payment. Our guide to standby letters of credit vs bank guarantees covers standbys in depth.
Figure 1 · Interactive
An open account sale, with and without protection
Tap a tab to see the plain open account flow, or the same sale with credit insurance or a standby behind it.
Sources: US International Trade Administration, Trade Finance Guide, 2022 edition, Chapters 4 and 6, and Export Credit Insurance page; FDIC, RMS Manual section 3.8; UN Convention on Independent Guarantees and Stand-by Letters of Credit. Steps marked structural are the Research Desk's sequencing.
Credit insurance is a large market. The , the global association of export credit and investment insurers, reports that its members insured US$3,345 billion of short-term trade in 2025, on its State of the Industry 2025 data page. That figure is members' business, not the whole market. Our guide to trade credit insurance explains policies and claims.
Figure 2
How insurers cover open account terms
Each card is a published cover level or market total.
Sources: US International Trade Administration, Export Credit Insurance page and Trade Finance Guide 2022; Export-Import Bank of the United States, Export Finance Solutions Guide, March 20, 2026; Berne Union, State of the Industry 2025, June 2026.
04 · Finance
The receivable an open account sale creates can be sold, discounted or financed
An open account sale leaves the seller with a receivable: money the buyer owes on a set date. Waiting for that money has a cost. The seller must fund its business in the meantime, and that funding has a price, its cost of funds.
Figure 3 · Try it
What an open account term costs the seller to carry
Set the invoice value, the term and a cost of funds. The result shows what carrying the receivable costs until the due date.
Term, days from shipment to the due date
Seller's annual cost of funds
Days the seller waits
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Cost as a share of the invoice
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Cost of carrying the receivable
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How it works: the cost equals the invoice value times the annual cost of funds times the days in the term, divided by 360.
Our Research Desk used simple interest: invoice x annual rate x days / 360. The rates shown are for illustration and are not Ossiano pricing.
This calculator explains the concept only. The actual cost depends on the seller's funding, any insurance or finance used, and whether the buyer pays on time.
The 360-day year follows US money market practice. The Alternative Reference Rates Committee calls Actual/360 the standard in US money markets, and the Federal Reserve's H.15 release annualizes money market rates on a 360-day year.
The seller does not have to wait. It can turn the receivable into cash early. In 2016 five industry bodies, BAFT, EBA, FCI, ICC and ITFA, published shared Standard Definitions for the techniques that apply to open account receivables and payables.
Two of those techniques matter most here. In , the seller sells its invoices to a finance provider at a discount, according to the Standard Definitions. In , a program run by the buyer, the seller can choose to receive the discounted value of its invoices before the due date. Our guides to receivables finance and payables finance explain each one.
Banks can also add a payment promise to open account trade. A is one bank's firm promise to another that payment will happen on a set date after a set event. The ICC rules for it, , were adopted on April 17, 2013 and took effect on July 1, 2013. The ICC Academy lists them as ICC publication 750E. They apply only where the parties choose to use them.
05 · Scale
Most world trade settles outside bank-intermediated products
There is no direct, current count of how much world trade runs on open account. Three published estimates give a sense of scale. Each has its own basis and date, so read them side by side, not as one series.
The World Trade Organization says some 80 to 90 percent of world trade relies on trade finance. Its definition is broad: trade credit plus insurance or guarantees, mostly short-term. The page is undated.
The BIS CGFS estimated in January 2014 that bank trade finance directly supports about one-third of global trade. This counts only finance that banks provide.
The same CGFS paper reports IMF and BAFT-IFSA bank surveys from 2009 to 2011. They put the share of global trade supported by bank finance at about 40 percent, with the rest on open account or cash in advance. That remainder is an old survey residual, not a current open account share.
06 · Ossiano view
Open account is the default term, and a toolkit has grown up around it
OBSERVATION 01
Buyers set the preference
The ITA calls open account one of the most advantageous options to the importer. Sellers that can offer it compete on terms as well as price, a use case the ITA names.
OBSERVATION 02
Insurance scales with it
Berne Union members insured US$3,345 billion of short-term trade in 2025, and export credit insurance lets exporters offer open account terms while minimizing non-payment risk, the ITA says.
OBSERVATION 03
The receivable is an asset to work
Receivables discounting sells an open account receivable to a finance provider at a discount, under definitions industry bodies standardized in 2016. The term that stretches the seller's cycle also creates the asset that can shorten it.
Summary
Open account gives the buyer time to pay, and the seller has tools to manage the wait
In an open account sale the goods ship first and the buyer pays later, typically in 30, 60 or 90 days. No bank checks documents or promises to pay. That makes it one of the best options for the buyer and one of the riskiest for the seller.
Sellers manage the risk with export credit insurance, which can cover 90 to 95 percent of a short-term sale, or with a standby letter of credit. They can turn the receivable into cash early through receivables discounting or a buyer's payables finance program. Where both sides agree, banks can add a bank payment obligation under the ICC's URBPO rules.
Related guides: The payment terms spectrum; Standby letters of credit vs bank guarantees; Receivables finance; Trade credit insurance; Payables finance; The cash conversion cycle.
Instrument cards: Open account; Trade credit insurance; Bank payment obligation (BPO); Standby letter of credit; Factoring; Invoice discounting; Payables finance. Every term on this page is defined in the Trade Finance Glossary.
For questions on how open account terms apply to existing or planned trade flows, contact the Ossiano Research Desk.
Sources
- US International Trade Administration, Trade Finance Guide: A Quick Reference for US Exporters (2022 edition), July 2022. Supports: open account definition and typical 30, 60 or 90 day terms (Chapter 6, page 14); recommendation for low-risk and competitive markets (Chapter 6); letters of credit recommended for higher risk or new relationships (Chapter 4, page 10); standby as a condition of open account terms (Chapter 6, page 15); open account as substantial risk to the exporter (methods of payment); publication date.
- US International Trade Administration, Methods of Payment, undated. Supports: open account as one of the most advantageous options to the importer and one of the highest risk options for the exporter.
- US International Trade Administration, Export Credit Insurance, undated. Supports: insurance lets exporters offer open account terms while minimizing non-payment risk; 90 to 95 percent short-term cover; terms up to 180 and 360 days.
- Export-Import Bank of the United States, EXIM Export Finance Solutions Guide (EBK-EFSG-26-03-20), March 20, 2026. Supports: one-year renewable short-term policy covering 95 percent of commercial and political nonpayment, generally up to 180-day terms.
- Berne Union, Berne Union State of the Industry 2025 (data highlights page), June 2026. Supports: US$3,345 billion of short-term trade insured by members in 2025.
- Federal Deposit Insurance Corporation, RMS Manual of Examination Policies, Section 3.8 Off-Balance Sheet Activities, June 2019. Supports: the account party signs a separate agreement to reimburse the bank for payments under a standby (page 3.8-3).
- UNCITRAL (United Nations), United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, December 11, 1995. Supports: a demand must conform to the terms and conditions of the undertaking (Article 15(1)).
- ICC Academy, Types of documentary credit: a comprehensive guide, October 21, 2024. Supports: a standby is a secondary obligation covering default only (section 8).
- Global Supply Chain Finance Forum, Standard Definitions page, 2016. Supports: Standard Definitions published in 2016 by BAFT, EBA, FCI, ICC and ITFA.
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance, 2016. Supports: receivables discounting definition; early payment of the discounted value under payables finance.
- International Chamber of Commerce, ICC launches first-ever rules for open account trade, April 17, 2013. Supports: URBPO adopted April 17, 2013, effective July 1, 2013.
- ICC Academy, URBPO e-book page, 2013. Supports: URBPO as ICC publication 750E, the first uniform rules for bank payment obligations.
- Bank for International Settlements, Committee on the Global Financial System, CGFS Papers No 50, Trade finance: developments and issues, January 2014. Supports: bank trade finance directly supports about one-third of global trade (page 1); inter-firm trade credit, including open account, as the main alternative to bank trade finance (page 4); IMF and BAFT-IFSA survey estimate of about 40 percent, with the rest on open account or cash in advance (page 9).
- World Trade Organization, Trade finance, undated. Supports: some 80 to 90 percent of world trade relies on trade finance, mostly short-term.
- Alternative Reference Rates Committee, SOFR "In Arrears" Conventions for Syndicated Business Loans, July 22, 2020. Supports: Actual/360 as the standard US money market day count, used in Figure 3.
- Board of Governors of the Federal Reserve System, Selected Interest Rates (Daily), H.15, September 29, 2026. Supports: money market rates annualized on a 360-day year, used in Figure 3.
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