What is it?

Open account means exporting on the basis of “ship now, pay later”.

  • Export the goods.
  • Buyer promises to pay later.
  • Trust the buyer.

It is called different things in different countries. For example, it is also referred to as exporting on “DA terms” or “sale contract”.

Why do exporters agree to “ship now and pay later” terms?

Many years ago, most world trade (over 50%) was supported by bank guarantees, called letter of credit.

Two things have happened:

  • Letter of credit products have become more expensive and complicated – and often no longer really provide effective protection to exporters.
  • During the last 20 years, Chinese banks have supported Chinese exporters with export finance – allowing them to offer open account, “ship now, pay later” terms to buyers.

So buyers have got used to working on open account and expect their exporters to offer it.

Open account provides significant benefits to the buyer:

  • The goods arrive and often can be sold before they have to be paid for.
  • The buyer has good cash flows. The more he buys, the more cash flow he generates.
  • It is simple and easy. No complicated forms, no fees to pay, no banking lines to use up, no need to recruit and keep trade finance specialists in the import department.

And the buyer is king – so if the buyer demands open account, exporters agree and then worry about it later.

Using supply chain trade finance makes open account safe

Without export finance, the exporter has to trust that the buyer will pay later. He also has to find the cash to purchase the materials and pay his workers whilst he is waiting for the buyer to pay later.

In many countries, exporters are not allowed to run these risks and governments demand that their banks control the export of goods to make sure that buyers pay cash before shipment.

With export finance, the exporter is paid at shipment and the financier takes the credit risk of the buyer. This makes open account safe for exporters.

Finance from PrimaDollar is the answer

PrimaDollar pays at shipment and takes the credit risk that the buyer will pay later.

A supply chain trade finance program organised with your buyer can enable you to get paid at shipment, allows the buyer to pay later – and typically can deliver savings of 1% or more on landed costs.

I am an importer: how do I set up a trade finance program?

Working with PrimaDollar means that your suppliers can get paid at shipment – whilst you get to pay later.

An import trade finance progam set up by us  is simple, low cost and does not require any collateral or personal guarantees from the exporter’s involved.

  1. Ask PrimaDollar to help you locate a suitable credit line that your suppliers can use.
  2. Finalise which exporting suppliers should be eligible (potentially all) and decide on:
    • What exporting suppliers should accept as a discount for early payment (you get the benefit of this!)
    • Your risk appetite – how much will you pay a given exporting supplier at shipment – 80%, 90%, 95% or 100%?
  3. Introduce PrimaDollar to your exporting suppliers.
  4. Let us sort out the remaining details with the exporting suppliers.
  5. Then data will flow to you through our platform in real-time as suppliers ship, regardless of ERP, logistics, product and geography. Suppliers will get paid as they ship and you will pay later.

How can I find out more?

With a global network and global coverage, talk to us.

  • More about trade finance: here
  • More about ESG: here

and

  • Contact us at your local office: here
  • Read more about PrimaDollar: here

 

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