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Open Account Payment
Open Account
In an open account trading scenario, the buyer has a much greater leverage than the seller. Under open account trade, the entire risk in the transaction is borne by the seller since the payment is made by the buyer only after the latter has taken possession of the goods. Seller's risk is therefore of non-payment or delayed payment.
Risk mitigants for the seller will be an established track record with the buyer, mutual dependence between the buyer and the seller or alternative structures built into the transaction such as avalisation, export factoring, etc.
The schematic below elucidates Open Account transaction flow :
