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 agrement.

KEY TAKEAWAYS

• Cash on delivery (COD) is when a recipient pays for a good or service at the time of delivery.
• A COD transaction can take several different forms and each can affect a company’s accounting.
• COD shipping offers customers an advantage in that they have time to save and make a full payment.
• Sellers receive faster payment for sales as long as the goods are accepted by the buyer.

Cash on Delivery vs. Cash in Advance

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 risk of non-payment, for the seller. 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 hand, has benefits for both the buyer and the seller.

The Bottom Line

COD is a payment 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.