Open account

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

Open account is selling on credit terms with nothing between seller and buyer but the invoice: the goods ship, and the buyer pays at the agreed date. It is the cheapest and simplest way to trade and the riskiest for the seller, which carries the buyer's credit risk in full — the reason exporters ask for letters of credit from buyers they do not yet know, and move to open account as trust builds. For the seller's lender the question moves with it: on open account the debtor it is relying on is the buyer, so the buyer is what gets underwritten, often with credit insurance behind it.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.