Payment Terms Buying Goods On Credit


Buying goods on credit means a business receives the goods now and pays for them later, usually within 30 or 60 days. The seller agrees to wait for the payment, giving the buyer time to sell the goods on and earn income before the bill is due.


Creditworthiness measures how likely a business is to pay for goods bought on credit on time.


KEYWORDS


Before sending goods on credit, the seller needs to know the buyer will pay on time. A buyer with a strong record of paying suppliers will be seen as creditworthy and will usually be offered credit. A buyer who has missed payments in the past or a new business may be refused credit and asked to pay Cash With Order or Cash on Delivery instead.


Cash on Delivery (COD)


Buying goods cash on delivery (COD) means the buyer pays for the goods when they arrive. The seller releases the goods only once payment has been made.


This protects the seller from the risk of not being paid by the customer. Cash With Order (CWO)


Buying goods cash with order (CWO) means the buyer pays for the goods when the order is placed. The seller does not send the goods until payment has been received.


This is often used with new customers or for goods made to order. Some businesses offer discounts to buyers who pay in cash instead of on credit.


Other Terms in Business Documents The following terms appear on many business documents:


Carriage Paid The seller will pay the cost of delivering the goods to the customer.


Carriage Forward The buyer pays the cost of delivery themselves (eg cost of the courier) when the goods arrive.


E & OE E & OE stands for ‘Errors and Omissions Excepted’.


This protects the seller if a mistake is later found on the document. The seller has the right to correct any errors.


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STRAND 2 CHAPTER 23: Business documents


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