We offer 180 days open account(credit) What does this term of trade really means?

Question

A supplier offered this trade term to my company, I want to know what he really meant whether selling on 100% credit or what.

Answer 1

On the face of it, it is very good offer. Go through the other conditions if any before your comany accepts this offer. This means the supplier is willing to give goods on credit for a period of 180 days to your company. May be there are other conditions to this clause.

Getting a credit of 180 days from the supplier is very good.
If you are dealing in the goods of the supplier and they maintain good quality control of the goods they supply, and your company is confident enough to sell the goods for a profit within 4 to 5 months, you can accept the offer. Get the goods from the suppliers add your expenses and margins and sell for a profit and repay the supplier well before the due date of repayment (180 days).

If your company can repay the credit within 90 days you can do double turnover within 180 days increasing your margins.

Answer 2

These terms are mainly associated with import and export that, due to the time between shipment on the high seas and arrival, extended credit has been commonplace.
If this is genuine 'open account', it will be interest free and you will be invoiced in the normal manner.
Obtain a copy of the company's terms and conditions as they may wish you to accept their bill of exchange if offering these extended terms.

Answer 3

180-day credit: you can pay at anytime up to 180 days but there should be a security, eg. Post-dated cheque or Letter of Credit

180-day 'Open' credit: you have 180 days to pay and no security required.

wish I can have lots of these

Answer 4

It means your company can owe them for up to 180 days on the things you buy from them. Ideally, you should pay up before then.