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 purchase agreement cash on delivery is also referred to as collect on delivery since delivery may allow for cash check or electronic payment eliana rodgers investopediaunderstanding 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 accrual accounting method under generally accepted accounting principles gaap with accrual accounting a company recognizes revenue at the time of the transaction and records the payment in 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 inventory payment 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 if a company allows for cod shipping it is willingly giving the customer more time to make a payment with somewhat less risk than a credit purchase 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 require payment from a purchaser until they have received their purchase advantages and disadvantages of cash on deliveryfor 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 days receivable for a business cod typically has shorter time frames to delivery than standard invoicing this is beneficial since the customer is required by an intermediary to pay at delivery with cod shipping customers have 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 the 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 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 established credit or alternative means for paying for goods the cons of cod for businesses are 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 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 risk of delivery refusal is greater 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 cash on delivery vs cash in advancecash 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 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 hand has benefits for both the buyer and the seller for cash on delivery terms goods are shipped before payment 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 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 offer cash in advance for buyers because their accounts receivable and collections processes are more advanced 