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Cash on Delivery (COD)

Cash on Delivery (COD)

What Is Cash on Delivery (COD)?

Cash on delivery (COD) is a type of transaction where the beneficiary pays for a decent at the hour of delivery as opposed to utilizing credit. The terms and accepted forms of payment shift as per the payment provisions of the purchase agreement. Cash on delivery is likewise alluded to as collect on delivery since delivery might consider cash, check, or electronic payment.

Grasping Cash on Delivery (COD)

A cash-on-delivery transaction can take various forms and may influence a company's accounting in various ways. Public companies are required to utilize the accrual accounting method under generally accepted accounting principles (GAAP). With accrual accounting, a company perceives revenue at the hour of the transaction and records the payment in accounts receivable in the event that the payment is deferred. Private companies can utilize either accrual or cash accounting. In cash accounting, the company must hold back to record the transaction as revenue until payment is received.

On the off chance that a customer is dealing with a merchant in person, and the customer makes a purchase from promptly available inventory, payment is collected at the hour of sale as a form of cash on delivery. Under the accrual accounting method, this prompts a more limited accounts receivable period and higher proficiency.

For longer-term accounts receivable agreements, companies can set up COD transportation that permits the customer to concede payment until the hour of delivery. On certain mail order platforms, for example, eBay, COD can be utilized to assist with limiting the risk of fraud between buyers and sellers. Overall, COD doesn't need payment from a purchaser until they have received their purchase.

Benefits of Cash on Delivery

For some businesses, in-person COD works with the immediate payment of goods and services. This is a critical accounting advantage since it can significantly abbreviate the days receivable for a business.

On the off chance that a company considers COD transportation, it is energetically giving the customer additional opportunity to make a payment with fairly less risk than a credit purchase.

COD regularly has more limited time spans to delivery than standard invoicing. This is beneficial since the customer is required by an intermediary to pay at delivery. With COD transportation, have the opportunity to collect the money to make a full payment. In any case, COD delivery builds the risk that a customer won't plan fittingly for payment, and the purchase should be returned. Returned purchases don't add to profits and may involve delivering return fees, the two of which are disadvantageous to the merchant.

For merchants, offering a COD payment option might upgrade consumer confidence in another company that has not yet earned strong brand recognition. Generally, laid out companies are reluctant to accept the risks of COD delivery, deciding on credit payment plans that charge interest and late payment fees.

Be that as it may, now and again, COD enjoys an upper hand over credit since the seller receives the full payment at delivery. COD can likewise assist merchants with keeping away from certain risks of buyer identity fraud, stopped payments, or electronic card questions. In certain countries, for example, India, cash-on-delivery transactions are supporting internet commerce. COD transactions appeal to consumers who don't have laid out credit or alternative means for paying for goods.

Cash on Delivery versus Cash in Advance

Cash in advance contrasts from cash on delivery as the buyer pays for a long term benefit or service before the product or service is delivered or sent. Cash-in-advance payment methods, like credit, are utilized to dispose of credit risk, or the risk of non-payment, for the seller. The seller benefits from cash in advance, and the buyer risks getting delayed or harmed goods or goods that are not true to form. Cash on delivery, then again, has benefits for both the buyer and the seller.

For cash-based on delivery conditions, goods are sent before payment is made. For cash-in-advance terms, the seller requires the buyer to make the whole payment upfront to start the delivery cycle. This shields the seller from lost money for goods transported without payment.

Cash in advance is the most common form of payment for online marketplaces, online business, and worldwide business trade. Whether a business decides to involve cash on delivery or cash in advance relies upon its ability to expect risk. Bigger businesses might offer cash in advance for buyers in light of the fact that their accounts receivable and collections processes are further developed.

Cash on Delivery (COD) FAQs

What Is going on with Cash on Delivery?

Cash on delivery is the point at which a buyer pays for goods or services whenever they are received. Cash in advance, then again, is when payment is made before the goods or services are sent — for instance, a web based business credit transaction.

How Does Cash on Delivery Work?

Buyers place an order, for instance, on a website, and request delivery. The customer doesn't make payment while ordering the thing and picks cash on delivery as a payment method. When the order is placed, an invoice is prepared by the seller, which is connected to the package. The package is delivered from the seller to the address given by the customer. The customer pays the deliverer or transporter utilizing cash or card. The COD amount is then stored into the account of the logistics partner or transporter. The logistics company remits the amount to the seller's account in the wake of deducting the taking care of charges.

What Are Examples of Cash on Delivery?

Instances of cash on delivery are when customers pay for a pizza that is delivered to their home, when a messenger conveys something that a customer has agreed to pay for when it is delivered, or when a customer picks up dress from the dry cleaning store. A few online stores will permit cash on delivery.

What Are the Pros and Cons of Cash on Delivery?

For businesses, the fundamental benefit of COD is that the payment period is more limited, and there is no defer in the receipt of cash. This shields businesses from the risk that a customer won't pay or pays late for goods and guarantees reliable cash flow. For consumers, COD gives them extra chance to fund the full payment. For buyers who don't approach credit, COD permits them to make purchases they could not in any case have the option to make.

The cons of COD for businesses are that there is a greater risk that goods will be rejected on delivery, and there are costs engaged with returning things. For buyers, it very well might be more challenging to return things in the event that they have proactively paid for them at delivery. A seller might be hesitant or under no obligation to acknowledge returns, even on the off chance that the consumer is discontent with the goods.

Pros of Cash on Delivery

  • The payment period is shorter than with other payment methods.

  • The method provides some protection from customers who might fail to pay or pay late.

  • Cash on delivery improves cash flow and budgeting.

  • Consumers who do not have credit can buy products.

Cons of Cash on Delivery

  • Greater risk of delivery refusal.

  • Returning items can be costly for sellers who lack return infrastructure and support.

  • Buyers may find it difficult to return items that do not meet expectations.

## The Bottom Line

COD is a payment option that has benefits for the two buyers and sellers. For buyers without credit, COD is a helpful method for buying the things that they need. For sellers, as long as the goods are accepted on delivery, payment is speedier. Eventually, the payment options that a seller gives really rely on how much risk the seller will expect and their capacity to handle intricacies like returns and late payments.


  • Sellers receive quicker payment for sales as long as the goods are accepted by the buyer.
  • COD transportation offers customers an advantage in that have opportunity and willpower to save and make a full payment.
  • Cash on delivery (COD) is the point at which a beneficiary pays for a decent or service at the hour of delivery.
  • A COD transaction can take several unique forms and each can influence a company's accounting.