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What is a Credit Order?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 05 December 2016
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Credit orders are sales orders that that are received without requiring payment at the time of delivery. Instead, the sales order is processed and an invoice is issued for the goods and services received. Generally, an invoice for a credit order will carry terms of payment that commit the recipient to pay the outstanding balance within a given period of time.

Sometimes referred to as a bill-me order, a credit order is one of the most common ways of doing business on credit. Goods and services are provided to a customer, with the expectation that the products will be paid for within a given time frame. Utilities are a common example. Usage for a specified period of time is billed to the customer after the fact, with a due date included on the invoice. The expectation is that the all charges included on the invoice will be paid on or before the due date.

Local businesses sometimes run tabs for regular customers. There is generally an understanding that the credit order will be paid in full by a certain date. In some instances, the tab may run for a few days. Businesses may choose to extend the credit order for as much as thirty calendar days before a bill or invoice is issued to the customer.

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The use of a credit order approach works very well for many customers and businesses. Customers are able to enjoy goods and services now without the need to pay in advance. At the same time, the customer who settles the balances on a credit order in a timely manner builds a solid credit reference with the vendor. This can come in handy when applying for revolving credit or a loan from another business institution.

Businesses that offer a credit order option to purchases attract customers who need goods or services now but wish to pay for them at a later date. Offering a credit order arrangement with a delayed payment schedule helps the business to build up a sizable client base. At the same time, staggering the due dates on the credit orders throughout the calendar month helps the business to maintain a steady cash flow.

While a credit order is not the ideal approach for all types of commerce, the arrangement is one that works well for many types of business enterprises.

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