When using a 'credit account' payment mechanism, when does a supplier receive payment for the goods?

A 'credit account,' also known as an 'open account,' is a form of trade credit. Under this arrangement, the supplier ships the goods and extends credit to the buyer, allowing them to pay at a later date. The payment is due after the goods have been delivered and an invoice has been issued, according to the agreed credit terms (e.g., 30, 60, or 90 days). Therefore, the supplier receives payment only after the buyer has received the goods. This mechanism is based on trust in the buyer's ability and willingness to pay.

B. Receiving payment in advance of delivery is known as 'payment in advance' or 'cash in advance', the opposite of a credit account.
C. A Purchase Order (PO) is a commercial document to order goods; payment on a credit account occurs much later, after delivery and invoicing.
D. Payment before an order is placed is a form of pre-payment or deposit and is not characteristic of a credit account arrangement.

1. CIPS. (2018). Ethical and Responsible Sourcing (L4M4). Profex Publishing. Chapter 5, Section 3: 'Payment mechanisms in an international context', states that with an open account, "the goods are shipped and delivered before payment is due".

2. Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2018). Fundamentals of Corporate Finance (12th ed.). McGraw-Hill Education. Chapter 20, 'Credit and Inventory Management', defines trade credit (open account) as the period between the delivery of goods and the payment for them.