Accounting: Credit Abbreviations

Credit Abbreviations

3/10: This means that a 3% discount off of the stated purchase price will be offered if payment is made within ten days of the invoice date (i.e., date of shipment).

1/15: A 1% discount is offered off of the purchase price if payment is made within 11-15 days of the invoice date.

n/60: Full payment must be made within at least sixty days of the invoice date with no discount offered after the 15th day.

M.O.M. or Middle of Month: Payment must be made by the middle of (15th day of the calendar month) on all purchases made since the previous middle of the month.

E.O.M. or End of Month: Payment must be made by the end of (28th, 29th!, 30th or 31st day of the calendar month, whichever applies) on all purchases made since the previous end of the month.

R.O.G.: This means that the due date is calculated as of the date that goods are received, rather than the invoice date.

C.W.O. or C.I.A. or Cash With Order or Cash in Advance: This means that payment must be received before the business receiving the order will even fill the order. No credit going to be given in such an instance.

C.B.D. or Cash Before Delivery: In this case, the selling business will not ship the finished product until payment is received. It will, however, start and finish the product before then.

S.D./B.L. or Sight DraftBill of Lading: This is a little complicated. Buyer provides the seller with a sight draft drawn on the buyer. Seller then sends a negotiable bill of lading, invoice, and the sight draft to the buyer’s bank, which pays on the sight draft. The bank then holds the draft as a note until the buyer makes good.

Combinations : Adding M.O.M. or E.O.M. to a standard discount/day abbreviation alters the terms slightly. For instance, 3/10; 1/15; n/30. E.O.M. shifts the date used to calculate the discount and due dates from the invoice date to the end of the month in which the goods were received.

You may be asking why people would offer a “discount” for prompt payment. The truth is that they do not. The initial discount price is the sales price as far as the seller is concerned. The difference between the discount and the full invoice price is the interest that the seller is charging the buyer for using his money. After all, when you offer someone credit you are giving them a loan, right? Businesses charge each other interest just like everyone else, it is just more polite to call it a “discount” rather than interest. Welcome to business.