Companies offer credit to customers for a number of reasons, allowing customers to place orders without immediate payment when they purchase goods or services. Most often it is only given to customers with a reasonable financial position. There are many forms of trade credit, the table below lists the abbreviated payment codes that businesses put on their invoices and explains what they mean.
Of course, one of the effects of offering credit to customers is that you often need to remind them to pay you. This is when having a credit control function in your business becomes so important.
| Abbreviation | Description |
|---|---|
| CWO | Cash with Order |
| CIA | Cash in Advance |
| CBS | Cash before Shipment |
| COD | Cash on Delivery |
| Upon Receipt | Payment due Immediately Upon Delivery of Invoice |
| EOM | End of Month. Payment is due at the end of the month of the invoice |
| Net Monthly Account | Payment is due at the end of the month following the month of the invoice |
| 30 days End of Month | Payment is due at the end of the month following the month of the invoice |
| 60 days End of Month | Payment is due at the end of the second month following the month of the invoice |
| Net 7 or 7 Days | Payment of the net amount outstanding on the invoice is due seven calendar days after the date of the invoice |
| Net 14 or 14 Days | Payment of the net amount outstanding on the invoice is due fourteen calendar days after the date of the invoice |
| Net 15 | Payment of the net amount outstanding on the invoice is due fifteen calendar days after the date of the invoice |
| Net 30 | Payment of the net amount outstanding on the invoice is due thirty calendar days after the date of the invoice |
| Net 60 | Payment of the net amount outstanding on the invoice is due sixty calendar days after the date of the invoice |
| 2% 10 Net 30 | Payment of the invoice is due within thirty calendar days but payments within 10 days can take a discount of 2% |
| 21 MFI | The 21st of the month following the invoice month |
| CND | Cash Next Delivery |
| 1MD | Monthly credit payment of a full month's supply |
| 2MD | Monthly credit payment of a full month's supply plus an extra calendar month |
Other terms associated with payment
| Term | Description |
|---|---|
| Contra | A payment from a customer less the value of purchases made by the supplier from the customer |
| Stage Payment | Payment of agreed amounts at certain times or upon the achievement of certain goals |
| Cash Account | No credit is given, payments to be made before delivery |
| Letter of Credit | A written undertaking from a bank to pay the beneficiary upon receipt of documents |
| Bill of Exchange | Promise to pay at a later date, usually with bank support |
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