This is an agreement you would really only enter into with a very good client – one that you trust. With an open account, you agree to supply the goods to the importer and, only once you have done so, do you then invoice the buyer. When the buyer receives the invoice he or she then effects payment. Clearly, in this situation you are at risk, should your client decide not to pay for whatever reason, because you have already supplied the goods. This is thus the most risky payment option for the exporter.
There may be some credit terms associated with an open account. In other words, you may agree with the importer that he/she only needs to pay you say 30 days after receiving your invoice. With an open account, you, as the exporter, carry all the risk associated with the sale. You may need to arrange financing to pay for the credit period, but banks might be reluctant to finance you solely on the strength of the open account as they have no guarantee that the importer will pay. Instead you may have to offer other forms of guarantee.
Exporting on consignment
Selling or exporting on consignment is a variation of the open account form of payment. Selling on consignment means that you supply the goods in advance to the importer and only once the importer manages to sell the goods is he/she required to pay you (for those items sold). Goods not sold after an agreed upon time period may be returned to you at your cost. Clearly, selling/exporting on consignment is a very risky form of exporting as you are not guaranteed any payment whatsoever. However, if you are very keen to break in to a particular market and are confident that your goods will sell, then you might want to consider selling your goods on consignment if the importer appears reluctant to give your goods a chance. You should nevertheless, do a credit check on the importer to ensure that he/she is reliable/trustworthy and solvent enough to pay you should they sell any of your goods.