What is Cash on Delivery? Benefits, Overview, 11 Facts

Cash on delivery, often known as COD, is a method of payment for the shipment of received goods. The payment is made when delivery is completed. Continue reading to obtain all the necessary information.

What is Cash on Delivery?

Cash on delivery (COD) refers to a sort of transaction in which the recipient pays for a product instead of utilizing credit. The terms and approved ways of payment differ based on the purchase agreement’s payment requirements.

What is Cash on Delivery

Cash on delivery is sometimes known as collect on delivery since payment may be made in cash, by check, or electronically.

Benefits of Cash on Delivery

The benefits of cash on delivery for suppliers

Cash-on-delivery helps suppliers to improve revenues by conducting business with clients to whom they would not otherwise grant credit. Instead of taking the risk of extending credit to these consumers from the outset, COD allows providers to give them the chance to establish a credit history while still receiving service.

By demanding payment at the time of delivery as opposed to on accounts receivable (AR), suppliers benefit from shorter payment cycles, which helps minimize days sales outstanding (DSO) and improve cash flow.

The benefits of cash on delivery for buyers

COD enables clients to manage their cash flow by requiring payment at the time of delivery, whereas the majority of ecommerce transactions accept payment in advance.

Cash on delivery also enables clients with limited or unfavorable credit histories to conduct business with merchants with whom they would not have been able to otherwise.

What is Cash on Delivery

Downsides Of Cash on Delivery

There is a larger possibility that products may be denied upon delivery, and there are fees associated with returning items when firms employ COD.

If a customer has already paid for an item upon delivery, it may be more difficult to return it. Even if a consumer is dissatisfied with the items, a seller may be unwilling or not required to accept returns.

Cash on Delivery vs. Cash in Advance

Cash in advance varies from cash on delivery in that the buyer pays for the goods or service prior to shipment or delivery. Credit and other cash-in-advance payment solutions are utilized to avoid credit risk or the risk of nonpayment for the seller.

The supplier gains by getting payment in advance, while the consumer risks receiving delayed, damaged, or otherwise substandard products. However, cash on delivery provides advantages for both the customer and the vendor.

What is Cash on Delivery

For cash-on-delivery agreements, shipment occurs prior to receipt of payment. To commence shipment under cash-in-advance arrangements, the vendor needs the customer to pay the full purchase price in advance. This safeguards the seller from financial loss for products sent without payment.

The most prevalent form of payment for online marketplaces, e-commerce, and international commercial transactions is cash in advance. Cash on delivery or cash in advance?

That relies on a company’s willingness to incur risk. Because their accounts receivable and collection methods are more advanced, larger enterprises may provide payment in advance to their customers.

How Does Cash on Delivery Work?

Buyers place an order, such as via a website, and request shipment. The consumer does not pay for the item at the time of ordering and selects cash on delivery as the payment method.

The seller prepares an invoice once the order is placed and attaches it to the package. The merchant ships the package to the address supplied by the purchaser.

The consumer pays the shipper or courier with cash or a credit card. The COD money is subsequently placed into the logistics partner’s or shipper’s account. After subtracting the handling fees, the logistics provider transfers the remainder to the seller.

What Are Examples of Cash on Delivery?

When consumers pay for a pizza that is delivered to their home, when a courier delivers something that a client has agreed to pay for when it is delivered, or when a customer picks up dry-cleaned garments, these are examples of cash on delivery. Some internet retailers provide cash-on-delivery.

How are the payment terms for COD different?

When extending credit, suppliers provide net 30, 60, or 90-day payment periods. This indicates that purchasers are required to make payments within 30, 60, or 90 days.

In contrast, cash on delivery clients are required to pay at the moment of delivery; otherwise, their order cannot be released. COD clients often have shorter delivery times than those who pay on credit.

What types of payment methods are used for COD?

COD transactions might incorporate additional payment choices, such as cheques, credit cards, and electronic payments, despite the term “cash on delivery.” Consequently, some vendors may refer to this payment option as collect upon delivery.

Frequently, however, clients pay through “offline” means like as checks or cash, making it difficult for suppliers to properly process and transmit such payments back to their enterprise resource planning (ERP) systems.

What are the alternatives to traditional COD?

While C.O.D. gives suppliers some cash flow advantages and protection from credit risk, it’s reasonable to conclude that the disadvantages significantly outweigh the rewards, especially when you consider that there are other options for collecting from your C.O.D. clients.

What is Cash on Delivery

1. Enroll your customers in AutoPay

With an accounts receivable automation platform that supports automated payments, you can get your cash on delivery customers making online payments without needing to extend credit to them.

With Versapay, you have the option of enrolling customers in AutoPay, where they can time payments to go out (via credit card or electronic transfer) as soon as an invoice gets issued—before their order is on its way. This way, COD buyers can still do business with you, and your team will save valuable time by no longer processing and applying manual payments.

In the Versapay platform, you can easily track which of your COD customers have already paid via AutoPay, helping you avoid loading products onto trucks only to have them return to your warehouse.

2. Identify cash on delivery customers on track to being credit-worthy

With an accounts receivable automation technology that allows automated payments, you may enable cash-on-delivery clients to make online payments without extending credit.

With Versapay, you have the option of enrolling clients in AutoPay, where they may schedule payments (by credit card or electronic transfer) to be processed as soon as an invoice is received, prior to their purchase being sent.

Thus, COD customers will still be able to conduct business with you, while your staff will save significant time by no longer manually processing and applying payments.

In coordination with your ERP, the Versapay platform provides a real-time picture of all your customers’ payment operations. This makes it simpler to determine which of your COD clients are current on their payments and may be appropriate candidates for an extension of payment terms.

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Companies can set up COD shipment for longer-term accounts receivable agreements, allowing the client to postpone payment until the time of delivery. COD can be utilized on some mail-order platforms, such as eBay, to reduce the risk of fraud between buyers and sellers. Overall, cash-on-delivery (COD) does not need payment from the buyer until they have gotten their item.

Cash on Delivery (COD) FAQs

Do I have to accept cash orders?

Orders with cash on delivery are entirely optional. You may toggle your choice on or off as frequently and anytime you choose. When you opt in, you may refuse these orders at any moment without affecting your ratings.

Q: How do I get paid?

For delivering the order, the client will pay you in cash, plus any cash gratuities. You will retain one hundred percent of the cash you receive, and the order amount will be immediately withdrawn from your subsequent direct deposit.

You can examine your weekly earnings breakdown to identify any cash deductions. Note that all gratuities are yours to keep and will not be deducted from your amount.

Q: Do I need to carry change?

To facilitate a speedy and painless drop-off, customers are required to have the exact amount + gratuity available. If they do not have the precise amount, you should bring $10 to $15 in tiny bills.


Cash on delivery is a beneficial payment method for both buyers and sellers. COD is an useful method of payment for people without credit who need to purchase goods.

As long as the items are accepted upon delivery, payment is expedited for vendors. Ultimately, a seller’s payment alternatives rely on the amount of risk they are ready to accept and their ability to manage difficulties such as returns and late payments.

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Pat Moriarty
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