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Ossiano Guides · Paying on terms
Open account terms of 30, 60 or 90 days let an importer receive goods before it pays. A discount for paying early has an annual rate the importer can compare with its own value of funds.
Terms like this have a quick explainer. Tap or hover on them.
01 · The spectrum
Payment terms decide who funds the goods while they travel
Every import has a gap in time. The goods leave the supplier, travel, and reach the importer. Someone has to carry the cost of the goods during that gap. The payment terms in the sales contract decide who it is.
At one end is : the importer pays first. The US International Trade Administration (ITA) describes it in its Trade Finance Guide (July 2022) as full or significant partial payment before shipment, usually by or credit card. The same guide notes that importers are concerned the goods may not be sent. On its Methods of Payment page, the ITA adds that payment comes before ownership of the goods passes to the importer.
At the other end is : the supplier ships first and the importer pays later. Goods ship before payment is due, typically in 30, 60 or 90 days, according to the ITA Trade Finance Guide. The guide recommends open account for low-risk trading relationships or markets, and for competitive markets. The ITA calls it one of the most advantageous options for the importer on its Methods of Payment page. In plain terms, open account is supplier credit: the supplier funds the importer for the agreed number of days. Our guide to the payment terms spectrum sets out every option in between.
Figure 1 · Interactive
Four ways an importer pays a supplier
Tap a payment method to see when cash leaves and who carries the risk.
02 · The middle ground
Letters of credit and collections trade cost for control of the documents
Between the two ends sit methods where banks handle the shipping documents. The documents matter because the importer needs them to collect the goods.
A is a bank's promise to pay the supplier when the right documents are presented. The ITA Trade Finance Guide says a letter of credit protects the importer, because the documents that trigger payment show the goods were shipped as agreed. Our guide to letters of credit covers them in depth.
A is simpler. The supplier's bank sends the documents to the importer's bank, and no bank promises to pay. For the importer, the ITA says it is cheaper and more convenient than a letter of credit. The ITA suggests it where open account is too risky for the supplier and a letter of credit is unacceptable to the importer.
Collections come in two forms. Under , the importer pays at sight to get the documents. Under , the importer signs a promise to pay later. With D/A, the ITA notes, the exporter extends credit to the importer through a , a bill payable on a set future date. See our guide to documentary collections.
03 · Why exporters agree to terms
Exporters extend terms when insurance or finance carries the credit risk
A supplier that ships on open account waits to be paid and carries the risk that the buyer does not pay. Insurance and finance can take that risk off the supplier, which makes longer terms easier to offer.
covers an exporter if a foreign buyer does not pay. The ITA's export credit insurance page says it lets exporters offer competitive open account terms, and short-term policies provide 90 to 95 percent coverage. The ITA Trade Finance Guide recommends this insurance alongside open account terms and pre-export working capital financing. Our guide to trade credit insurance explains how cover works.
is a second route: the exporter sells its foreign invoices for cash. The ITA says it suits an established exporter that wants the flexibility of open account, no credit losses or outsourced collections. See the factoring instrument card.
An importer can also offer comfort of its own. A is a backup bank promise that the supplier can draw on if the importer does not pay. The ITA notes that using one as a condition for open account terms greatly improves cash flow for the importer while reducing the exporter's risk of non-payment.
04 · Pricing a discount
An early payment discount is an annual rate to compare with the value of funds
Some suppliers offer a lower price for paying early. This is an . It is often written like "2/10 net 30": take 2 percent off if you pay within 10 days, or pay the full amount by day 30. The "net 30" part is the .
Paying early means giving up days of supplier credit. In 2/10 net 30, the importer gives up 20 days. The question is whether the discount is a good return for those 20 days. To answer it, turn the discount into an annual rate. Then compare that rate with what the money is worth to the business elsewhere, its value of funds.
The US Treasury publishes this test for federal agencies. Its Prompt Payment discount calculator page (updated February 26, 2026) says: if the effective annual discount rate is larger than the current , accept the discount and pay early. If it is smaller, pay as close to the due date as possible. The page shows the current rate as 4.00%. That rate applies to US federal agencies. We use it below only as a public example benchmark.
Our Research Desk ran four illustrative sets of terms through the standard simple formula. 2/10 net 30 works out at 37.2449 percent a year. 2/10 net 60 works out at 14.8980 percent. 1/10 net 90 works out at 4.6086 percent, and 0.5/10 net 60 at 3.6683 percent. Against the 4.00 percent benchmark, the first three are above it and the last is below it. Against an illustrative 7.00 percent, only 2/10 net 30 and 2/10 net 60 are above it. These are illustrations of the Treasury's stated test, not recommendations.
Figure 2 · Try it
Is the supplier's early payment discount worth taking?
Tap the pills to set the discount terms, then move the slider to your value of funds.
Discount for paying early
Pay within (discount days)
Otherwise pay in full by (net days)
Credit days given up
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Discount on a $1,000,000 invoice
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Annualized simple rate
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How it works: the annualized simple rate equals the discount divided by (one minus the discount), times 365, divided by (net days minus discount days). The Treasury's test compares that rate with the value of funds.
Our Research Desk used the standard simple annualization: d / (1 - d) x 365 / (net days - discount days). The 4.00 percent default is the US Treasury's stated value of funds rate (February 26, 2026), used only as an example benchmark. The rates shown are for illustration and are not Ossiano pricing.
This calculator explains the concept only. Each importer's value of funds, currency and supplier terms differ.
The other side of the same choice is what the credit days are worth when the importer does not pay early. The table puts a simple value on 30, 60 and 90 days of supplier credit.
Figure 3
What 30, 60 and 90 days of supplier credit are worth
Read each row for the funding value of the terms on a $1,000,000 invoice.
Our Research Desk used simple interest on a 360-day year at an illustrative 5.00 percent: invoice x rate x days / 360. Terms of 30, 60 or 90 days per the International Trade Administration, Trade Finance Guide, July 2022. Not Ossiano pricing.
For how rates and fees are set across trade finance, see our guide to how trade finance is priced. For buyer-led programs that pay suppliers early at a discount, see dynamic discounting.
05 · The federal model
US federal agencies pay in 30 days by default and take discounts only when justified
The US government is a large buyer with written payment rules. They show one clear way to manage supplier terms.
Under 5 CFR 1315.4, the payment period starts on the date an agency receives a proper invoice. If the contract sets no other date, offers no discount and uses no faster payment method, payment is due 30 days after that start.
Agencies may take an offered discount if it is economically justified, but they are not required to, the Treasury's Prompt Payment discounts page explains. When they do take it, 5 CFR 1315.7 says payment is made as close as possible to, but no later than, the discount date. The rule also says the discount period runs from the invoice date.
The rules also set an interest rate for late payment. The Treasury's Prompt Payment interest rate for July 1 to December 31, 2026 is 4.75 percent.
06 · Scale
Terms decisions sit on a large import base
US imports of goods and services were $399.3 billion in July 2026, according to the US Census Bureau and Bureau of Economic Analysis FT-900 release of September 3, 2026. The next release is due on October 6, 2026. Each of those purchases is paid on some set of terms.
Large buyers also run formal programs around their payment terms. In a , the buyer confirms invoices to a finance provider, and suppliers can ask that provider for early payment. AT&T reported supplier finance program obligations of USD 4,455,000,000 at September 30, 2025, up from USD 2,498,000,000 at December 31, 2024, in its SEC filing data. Our guide to payables finance explains how these programs work.
07 · Ossiano view
Supplier terms are a funding source with a visible price
OBSERVATION 01
Terms fund the importer's working capital
Open account lets goods ship before payment is due, typically in 30, 60 or 90 days, per the ITA. For that period, the supplier finances the importer.
OBSERVATION 02
Insurance and factoring widen what exporters can offer
Export credit insurance covering 90 to 95 percent and export factoring let exporters offer open account terms to buyers they might otherwise ask to pay first.
OBSERVATION 03
A public benchmark exists for pricing a discount
The US Treasury tests every offered discount against its value of funds rate, 4.00 percent on its current page. Importers can apply the same comparison with their own rate.
Summary
Supplier terms give importers time, and each discount has a price to test
Payment terms decide who funds goods in transit. Cash in advance puts that cost on the importer. Open account, typically 30, 60 or 90 days, puts it on the supplier. Letters of credit and documentary collections sit in between, with banks handling the documents.
Suppliers offer terms more readily when export credit insurance, factoring or a standby letter of credit carries the risk. When a supplier offers a discount for paying early, turn it into an annual rate and compare it with your value of funds. That is the test the US Treasury sets for federal agencies, with a current rate of 4.00 percent.
Related guides: The payment terms spectrum; Open account trade; Letters of credit; Documentary collections; Dynamic discounting; Payables finance; Trade credit insurance; How trade finance is priced.
Instrument cards: Open account; Cash in advance; Letter of credit (sight); Documentary collection, documents against payment (D/P); Documentary collection, documents against acceptance (D/A); Standby letter of credit; Trade credit insurance. Every term on this page is defined in the Trade Finance Glossary.
For questions on how supplier terms apply to existing or planned trade flows, contact the Ossiano Research Desk.
Sources
- US Census Bureau and US Bureau of Economic Analysis, US International Trade in Goods and Services, July 2026 (FT-900), September 3, 2026. Supports: US imports of $399.3 billion in July 2026; next release on October 6, 2026.
- US International Trade Administration, US Department of Commerce, Trade Finance Guide: A Quick Reference for US Exporters (2022 edition), July 2022. Supports: cash in advance definition and importer concern (Chapter 3); letter of credit protection for the importer, document-based payment and the eight-step flow (Chapter 4); documentary collection cost, use and D/P and D/A terms (pages 12 and 13); open account terms of 30, 60 or 90 days and its recommended use (Chapter 6, page 14); standby letter of credit with open account (page 15); export credit insurance use (page 21); export factoring fit (page 22).
- US International Trade Administration, Export Credit Insurance, undated. Supports: competitive open account terms; 90 to 95 percent short-term coverage.
- Bureau of the Fiscal Service, US Department of the Treasury, Prompt Payment: Discount Calculator, February 26, 2026. Supports: the accept-or-reject test for discounts; current value of funds rate of 4.00%.
- US International Trade Administration, Methods of Payment, undated. Supports: cash in advance payment before ownership transfers; open account as one of the most advantageous options for the importer.
- US Government Publishing Office / National Archives (eCFR), 5 CFR 1315.4 Payment due date and payment period, September 25, 2026. Supports: payment period starts on receipt of a proper invoice, 1315.4(f); default due date 30 days later, 1315.4(g)(1).
- Bureau of the Fiscal Service, US Department of the Treasury, Prompt Payment: Discounts, September 5, 2019. Supports: agencies may take an offered discount if economically justified, but are not required to.
- eCFR (Office of the Federal Register), 5 CFR 1315.7 Discounts, August 6, 2026. Supports: payment as close as possible to, but no later than, the discount date, 1315.7(c); discount period runs from the invoice date.
- Bureau of the Fiscal Service, US Department of the Treasury, Prompt Payment Interest Rate, June 30, 2026. Supports: Prompt Payment interest rate of 4.75 percent for July 1 to December 31, 2026.
- 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.
- AT&T Inc. via SEC EDGAR, SEC XBRL company concept, SupplierFinanceProgramObligation, CIK 0000732717, October 31, 2025. Supports: supplier finance program obligations of USD 4,455,000,000 at September 30, 2025 and USD 2,498,000,000 at December 31, 2024 (Q3 2025 Form 10-Q).
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