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corporate account

A corporate account means many things but the simplest definition is an arrangement to buy goods and/or services on account without making immediate cash or cheque payments.

From the perspective of the creditor, or supplier, this account should induce more sales over time by allowing customers to make purchases without immediate cash. This flexibility in purchasing methods also encourages customers to make larger purchases when prices are right than they might if they had to pay cash upfront; in addition, it will allow the account holder to buy needed inventory even when cash balances are low.

When a business enters into a corporate account arrangement with its suppliers, a limit is usually set, commonly called credit terms. For example, you could set cash, cheque or bank transfer payments to be made within 15 days from the date of the invoice, hopefully allowing you to still qualify for any early payment discount. If payments are not made within the terms, all outstanding amounts are required to be settled within the normal time period set from the date of purchase.

A primary reason to take a corporate account is to improve your short-term cash position. By minimizing the amount of cash you pay at the time of purchase, you preserve cash for more immediate needs. Additional benefits are: 

1. There are no formal legal instruments/acknowledgements of debt.

2. It is an internal arrangement between the buyer and seller.

Lastly, this type of account is only available to those companies that have a good track record of repayment in the past.