A British cash on delivery registered letter from 1940s London showing 4s 7d due on delivery.
Cash on delivery (COD), sometimes called payment on delivery,[1]cash on demand, payment on demand or collect on delivery[2] is the sale of goods by mail order where payment is made on delivery rather than in advance. If the goods are not paid for, they are returned to the retailer.[3] Originally, the term applied only to payment by cash but as other forms of payment have become more common, the word "cash" has sometimes been replaced with the word "collect" to include transactions by checks, money orders, credit cards or debit cards.
Advantages and disadvantages for retailers
Advantages of COD for online or mail order retailers:
The customer does not need to own a credit card to purchase.
Impulse purchases may increase as payment is not due at the time of ordering.
The credibility of retailers may be increased because the consumer only has to pay when the item is delivered.
Disadvantages of COD for online or mail order retailers:
Orders might be returned as buyers are less committed to the purchase than if they had paid in advance (which led to the eventual elimination of C.O.D. with many TV offers in the United States and Canada by the early 1980s).
Logistics partners charge additional fees for COD orders.
Limits
Most operators impose a limit on the amount of money that can be collected per delivery or per day using COD services. Limits may be higher for non-cash payments. Canada Post, for instance, applies a limit of C$1,000 for cash, but C$5,000 for payment by check or money order.[4]
Cash on delivery order management
Cash on Delivery (COD) is a widely practiced payment method in e-commerce, allowing customers to make payments for their orders in cash upon delivery. Managing COD orders involves a straightforward and reliable process to ensure seamless transactions between online retailers and customers.[5]
Order Processing and Payment Status:
When a customer places an order with the cash on delivery option, the online retailer's administrative panel displays the payment status as "Pending." This status reflects the fact that the payment is yet to be collected from the customer.
Upon successful delivery of the ordered item, the delivery personnel collects the payment in cash from the customer. The online retailer is then responsible for updating the payment status to "Paid" on the admin panel. This update confirms that the payment has been successfully received for the order.
The handling of the shipping status may vary depending on the e-commerce platform being used. In some cases, the shipping status is automatically set to "Delivered" once the payment status is updated to "Paid." This process helps track the progress of the order, allowing both the retailer and the customer to verify that the item has been successfully delivered.
Upon placing an order with the COD payment method, customers receive an email confirming that their order has been created and is currently being processed. Subsequently, the merchant and customer communicate to determine the delivery time, manual payment methods, and other details.
Accounting
Cash accounting is an advantageous approach for eCommerce businesses handling Cash on Delivery (COD) payments, allowing revenue recognition only when the payment is received. With real-time revenue recognition, this method ensures accuracy in financial reporting, simplifies the accounting process, and provides a transparent view of the company's financial performance. By recording revenue upon successful collection of payment, cash accounting facilitates efficient management of COD orders, benefiting both the business and its stakeholders.[6]
Popularity in the developing world
In some countries COD remains a popular option with internet-based retailers, since it is far easier to set up for small businesses and does not require the purchaser to have a credit card. Many small businesses prefer cash payment to credit card payment, as it avoids credit card processing fees. Some shops also offer discounts if paid in cash, because they can offer a better price to the consumer.
COD is a widely used model in India.[7] The overwhelming majority of e-shopping transactions in the Middle East are COD. Sixty percent of online transactions in the UAE and Middle East are done by cash on delivery[8] and this has also led to the growth of courier companies offering a COD service.[9]
