Open account trading

The form of settlement whereby companies invoice their customers and expect to receive payment in due course, usually 30, 60 or 90 days after invoice date. By ´extending credit´ in this way there is no guarantee of payment such as when a letter of credit is used. A company knowing its customers, which can be strengthened by credit information or by insuring the debts, can mitigate the risk of non-payment. Where debts are insured, insured finance should be considered but not where factoring, selective invoice finance or receivables financing may be an alternative. Open account trading is very popular and is the standard form of settlement in Europe.