Open Account Payment Terms: When Does the 30-Day Clock Actually Start?
- Iman Yusoff
- Jul 23
- 8 min read
Open account payment terms let the exporter ship first and collect later, usually 30, 60 or 90 days afterwards. No bank guarantees the payment. The credit period runs from a date the contract names. That date may be the invoice, the bill of lading, arrival or acceptance. That single choice decides who funds the gap.
Most SME exporters negotiate the number and ignore the date. Therefore they agree to "60 days" without asking sixty days from what. Two contracts can both say 60 days and settle three weeks apart. Consequently the exporter who picked the wrong start date finances a shipment they thought was already sold.
This guide explains how the credit clock works in practice. It also shows where the rules stop and your contract takes over. Still choosing a payment method? Start with our letter of credit vs open account decision guide.
What open account payment terms actually mean
An open account is a trade arrangement built on delay. The seller ships, invoices, then waits until an agreed future date. No bank examines documents. No bank promises to pay. The buyer receives the cargo, clears it, and settles the invoice when the credit period ends.
The US International Trade Administration defines it the same way. Goods ship and deliver before payment falls due. That is typically 30, 60 or 90 days (International Trade Administration, Methods of Payment). Traders also call open account payment terms "open account basis", "O/A" or simply trade credit. The label matters less than the structure. Specifically, the seller becomes an unsecured creditor from the moment the goods leave. Meanwhile the buyer holds both the cargo and the cash until the due date arrives.
Open account versus documentary collection
Open account and documentary collection both delay payment. However, they differ on who controls the documents. Under a documentary collection, banks move the shipping documents and release them against payment or acceptance. Under open account, the seller sends documents directly to the buyer and keeps no leverage at all. Our documentary collection D/P and D/A guide covers that middle ground.
The four dates that can start your credit period
Four dates commonly anchor an open account credit period. They are the invoice date, bill of lading date, arrival date and acceptance date. Each shifts the due date by days or weeks. Importantly, no international rulebook picks one for you. The sales contract decides, and silence in the contract creates the dispute.
How each start date changes an open account credit period
Start date named in the contract | What triggers the clock | Effect on the exporter |
Invoice date | The date the seller raises the commercial invoice | Most favourable. The seller controls when the clock starts. |
Bill of lading date | The date the carrier issues or dates the B/L on board | Common in Asian trade. Transit time eats the credit period. |
Arrival or discharge date | The date the vessel discharges at the destination port | Weaker. Delays, congestion and rollovers push payment later. |
Acceptance or goods-received date | The date the buyer confirms receipt or inspection | Weakest. The buyer effectively controls the start of the clock. |
Read the table as a risk ladder. As you move down it, the exporter surrenders more control. Notably, an acceptance-based clock lets a slow buyer delay the trigger indefinitely by simply not confirming receipt.
Why "30 days from bill of lading date" costs more than it looks
A bill of lading dated clock starts while the cargo is still at sea. Therefore the transit consumes part of the credit period before the buyer even receives the goods. Take a two-week sailing on a 30-day term. The buyer gets roughly two weeks of real credit. The exporter carries a full month of exposure.
A second trap sits inside the document itself. A shipped-on-board bill of lading carries an on-board date that can differ from the issue date. Consequently two parties can compute two different due dates from the same B/L. Our breakdown of original, telex and seaway bill of lading types explains which document carries which date.
Across the Singapore–Malaysia–Indonesia corridor, this dispute repeats with the same shape. The seller counts from the B/L issue date. The buyer counts from the on-board notation, or from the day the container finally cleared customs. Neither side is lying. Instead, the contract simply never said which date governed.
Write the start date into the contract, not the invoice
Fix your open account payment terms in the sales contract, not on the invoice footer. State the trigger document, the exact field on it, and the counting convention. For example: "Payment 60 calendar days from the on-board date shown on the ocean bill of lading." Consequently both accounting teams agree.
What the ICC rules cover, and what they leave to you
The International Chamber of Commerce publishes the rulebooks that govern bank-intermediated payment. UCP 600 governs letters of credit. URC 522 governs documentary collections. Neither applies to an open account sale, because no bank stands between the parties.
That absence is the point many exporters miss. Under a letter of credit, a rulebook defines examination, discrepancy and payment. Under open account, nothing external fills the gaps. As a result, your contract, your governing-law clause and your invoice wording carry the entire burden.
This also changes what happens when payment fails. An open account default is an ordinary commercial debt. Recovery runs through negotiation, collection agents or the courts named in your contract. Therefore the governing-law and jurisdiction clauses matter far more here than under any bank-backed instrument.
How the credit period drains SME working capital
Open account payment terms convert every credit day into a day you fund someone else's inventory. The cost stacks: goods already paid for, freight already paid, duties possibly already paid, and revenue still unbanked. Consequently a growing exporter on long terms can be profitable on paper and short of cash every month.
Three costs run in parallel during the credit period:
Cost of goods. Your supplier was paid before the cargo shipped.
Cost of freight and clearance. Forwarder invoices rarely wait 60 days.
Cost of financing the gap. Overdraft or facility interest accrues daily.
Price this into the quote rather than absorbing it after the fact. Additionally, watch the charges that appear after the shipment leaves, since those land inside the credit period too. Our guide to hidden shipping costs that drain SME profit lists the fees that most often surprise first-time exporters.
Include duty and tax timing in the calculation
Import duty and tax fall due at clearance, not at payment. Therefore an importer on 90-day terms still funds the tax on day one. Work out the full landed figure before you agree to any credit period. Our landed cost calculation method for Singapore importers shows the steps.
Financing the gap: what Singapore SMEs can use
Singapore-registered enterprises can access government risk-shared trade financing through the Enterprise Financing Scheme. EnterpriseSG shares the default risk with participating financial institutions, which widens SME access to trade facilities. The scheme covers both domestic and overseas transactions, and applications run through participating banks.
EnterpriseSG publishes three headline eligibility criteria for the trade loan facility. The entity must be registered and operating in Singapore. It must hold at least 30% local equity, directly or indirectly. Group annual sales turnover must not exceed S$500 million (EnterpriseSG). Loan quantum and risk-share parameters change each Budget cycle. Therefore confirm current figures on the EnterpriseSG scheme page first.
Trade credit insurance is the other common tool. It covers buyer insolvency and protracted default up to an underwritten credit limit per buyer. Premiums, cover ratios and eligibility differ by insurer, so treat any figure you read elsewhere as indicative only.
How to set open account terms that survive a dispute
Six steps turn vague open account payment terms into enforceable ones. Work through them before the first shipment, not after the first late payment. Each step removes one common argument that buyers use to push a due date backwards.
Earn the term. Grant open account after a buyer completes several paid transactions, never on a first order.
Name the trigger document. Specify the exact document and field the clock reads.
State calendar days. Write "calendar days" so weekends and public holidays cannot be argued away.
Set the payment mechanism. Name the remittance method and who bears the bank charges.
Add a late-payment consequence. Define interest or a suspension right, and reference it on every invoice.
Fix governing law and jurisdiction. Choose a forum you can realistically use.
Step four deserves a note. Sellers frequently discover that the buyer deducted intermediary bank charges from the settlement. Consequently the invoice arrives short and the account never reconciles. Our telegraphic transfer versus letter of credit guide covers how remittance charges are allocated.
How IFG helps you get the dates right
IFG Shipping controls the documents that start the clock on your open account payment terms. We prepare and check the bill of lading, invoice and packing list so the dates agree across all three. Additionally, we flag when a requested payment term will collide with the real transit time on your lane.
Iman Yusoff founded IFG Shipping Pte Ltd and has spent 25 years in freight forwarding across Southeast Asia. His career spans global forwarding at Panalpina, now DSV, and SDV, now Bolloré, plus NVOCC operations along the Singapore–Malaysia–Indonesia corridor. He serves as Board Member and Secretary of the Singapore Malay Chamber of Commerce and Industry. See Iman Yusoff's freight experience across the corridor.
Payment terms and shipping terms interact more than most SMEs expect. Your Incoterm decides when risk transfers; your payment term decides when cash moves. Read our Incoterms 2020 explanation of costs and risk transfer alongside this one. Alternatively, browse the full IFG trade finance guides.
Questions SME exporters ask about open account terms
What does open account payment mean in international trade?
Open account payment means the exporter ships first and invoices for later payment. The agreed credit period is commonly 30, 60 or 90 days. No bank guarantees the payment. The exporter carries the full non-payment risk for the entire credit period.
What does "30 days from bill of lading date" mean?
It means payment falls due 30 calendar days after the bill of lading date. It does not mean 30 days after the buyer receives the goods. The clock therefore starts while the cargo is still moving. Transit time is consumed from inside the credit period.
Which date should an exporter push for?
Invoice date gives the exporter the most control, because the seller issues the invoice. Bill of lading date is the common compromise in Asian trade. Arrival and acceptance dates hand timing control to the buyer and to circumstances neither party controls.
Is open account the same as trade credit?
In practice, yes. Open account is the international-trade form of trade credit. The seller supplies goods now and collects later, without a bank guarantee. The terminology differs by industry and region, but the risk structure is identical.
What happens if the buyer does not pay on the due date?
An unpaid open account invoice is an ordinary commercial debt. The exporter pursues it through negotiation, a collections agent, or credit insurance. Failing that, the courts named in the contract decide. No ICC rulebook applies, which is why the contract wording decides the outcome.
Should a first-time exporter offer open account terms?
Rarely. Open account suits buyers who have already paid reliably across several transactions. On a first order, use a letter of credit, documentary collection or partial advance. Build the payment history first.
Get your payment terms and shipping documents aligned
Send us the payment term your buyer proposed. We will tell you which date it really starts from. We will show what it does to your cash on that lane. Then we will help you word it so both sides agree.
WhatsApp: +60 14-325 8325
Email: contact@ifgshipping.com
Office: 51 Changi Business Park Central 2, Singapore 486066
Sources
EnterpriseSG — Enterprise Financing Scheme – Trade Loan: enterprisesg.gov.sg
EnterpriseSG — Enterprise Financing Scheme overview: enterprisesg.gov.sg
US International Trade Administration — Methods of Payment in International Trade: trade.gov
International Chamber of Commerce — UCP 600: iccwbo.org
International Chamber of Commerce — URC 522: iccwbo.org
Disclaimer. This guide provides general trade information, not financial, legal or tax advice. Payment terms, financing schemes, eligibility criteria and insurance cover change and vary by institution and jurisdiction. Figures and scheme parameters are stated as published at the time of writing. Verify current requirements with EnterpriseSG, your bank, your insurer and a qualified adviser before agreeing to any payment term.
Editorial note: written for ASEAN SME exporters and importers. SEO, AEO and GEO editorial support by SingRank.
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