What Is Cash on Delivery (COD)?

Cash on delivery (COD) is a type of transaction where the recipient pays for a good at the time of delivery rather than using credit. The terms and accepted forms of payment vary according to the payment provisions of the 澳洲幸运5开奖号码历史查询:purchase agreement.

Cash on delivery is also referred to as “collect on delivery” since delivery may allow for cash, check, or electronic 🐟payment.

Understanding Cash on Delivery (COD)

A cash-on-delivery transaction can take different forms and may affect a company’s accounting differently. Public companies are required to use the 澳洲幸运5开奖号码历史查询:accrual accounting method under 澳洲幸运5开奖号码历史查询:generally accepted accounting prin🎃ciples (GAAP).

With accrual accounting, a company recognizes revenue at the time of the transaction and records the payment in 澳洲幸运5开奖号码历史查询:accounts receivable if the payment is deferred. Private companies can use either accrual or cash accounting. In cash accounting, the company must wait to record the transaction as revenue💃 until payment is received.

If a customer is dealing with a merchant in person and the customer makes a purchase from readily available 澳洲幸运5开奖号码历史查询:inventory, paymeꦍnt is collected at the time of sale as a form of cash on delivery. Under the accrual accounting method, this leads to a shorter accounts receivable period and higher efficiency.

For longer-term accounts receivable agreements, companies can set up COD shipping that allows the customer to defer payment until the time of delivery. On certain mail order platforms, such as eBay, COD can be used to help minimize the risk of fraud between buyers and sellers. Overall, COD does not requi🗹re payment from a purchaser until they have received their pu🉐rchase.

Advantages and Disadvanta☂ges of Cash on Delivery

Advantages

For many businesses, in-person COD facilitates the immediate payment of goods and services. This is a significant accounting advantage because it can greatly shorten the 澳洲幸运5开奖号码历史查询:days receivable for a business.

COD typically has shorter 澳洲幸运5开奖号码历史查询:time frames to delivery than standard 澳洲幸运5开奖号码历史查询:invoicing. This is beneficial since the customer is required by an intermediary to pay at delivery. With COD shipping, customers h𒀰ave time to collect the money to make a full payment.

However, COD shipping increases the risk that a customer will not plan appropriately for payment and th🌠e purchase will have to be returned. Returned purchases do not contribute to revenues and even less to profit and do entail lost shipping costs, both of which are disadvantageous to the merchant and🦄 the customer experience.

For merchants, offering a COD payment option may enhance consumer confidence in a new company that has not yet earned strong 澳洲幸运5开奖号码历史查询:brand recognition. Generally, established companies are unwilling to assume the risks of COD shipping, opting for credit payment plans that charge interest and late payment fees.

However, in some cases, COD has an advantage over credit since the seller receives the full payment at delivery. COD can also help merchants avoid some risks of buyer identity fraud, stopped payments, or electronic card disputes. In some countries, such as India, cash-on-delivery transactions are boosting internet commerce. COD transactions appeal to consumers without establ♋ished credit or alternative means for paying for goods.

Disadvantages

The cons of 𓄧COD for businesses arﷺe that there is a greater risk that goods will be refused on delivery, and there are costs involved in returning items. For buyers, it may be more difficult to return items if they have already paid for them at delivery. A seller may be reluctant or under no obligation to accept returns, even if the consumer is unhappy with the goods.

Cash on Delivery vs. Cash in Advance

澳洲幸运5开奖号码历史查询:Cash in advance differs from cash on delivery, as the buyer pays for the good or service before the product or service is delivered or shipped. Cash-in-advance payment methods, such as credit, are used to eliminate the seller’s 澳洲幸运5开奖号码历史查询:credit risk, or the risk of nonpayment. The🀅 seller benefits from cash in advance, and the buyer risks receiving delayed or damaged goods or goods that are not as expected. Cash on delivery, on the other h꧑and, has benefits for both the buyer and the seller.

For cash-on-delivery terms, gꦕoods are shipped before paym🎀ent is made. For cash-in-advance terms, the seller requires the buyer to make the entire payment upfront in order to initiate the shipping process. This protects the seller from lost money for goods shipped without payment.

Cash in advance is the most common form of payment for online marketplaces, ecommerce, and 澳洲幸运5开奖号码历史查询:international business trade. Whether a business꧂ chooses to use cash on delivery or cash in advance depends on its ability to assume risk. Larger businesses may offe🦄r cash in advance for buyers because their accounts receivable and collections processes are more advanced.

The Bottom Line

Cash on delive𒁃ry is a pa🍨yment option that has benefits for both buyers and sellers. For buyers without credit, COD is a convenient way to buy the things that they need. For sellers, as long as the goods are accepted on delivery, payment is quicker. Ultimately, the payment options that a seller provides depend on how much risk the seller is willing to assume and their capacity to handle complications such as returns and late payments.