Definition
Cash on delivery (COD) is a payment term where the buyer pays at the moment goods or services are delivered, rather than receiving an invoice to pay later. Payment may be cash, card, check, or an instant transfer. COD removes credit risk for the seller because nothing is handed over until it is paid for.
Also called: COD, Collect on delivery, Payment on delivery
Cash on delivery in practice
Sellers use COD for new customers without a payment history, customers who have paid late before, and one-off retail-style sales. Couriers can also collect payment on the seller's behalf for a fee.
Even with COD you should still issue an invoice or receipt at the time of delivery, showing the amount paid. That gives the customer proof of purchase and gives you a record for your books and tax returns.
COD protects the seller but can be inconvenient for business buyers, whose accounts payable teams are set up to pay invoices on terms. Moving reliable customers to Net 15 or Net 30 can win more orders.
Example
A firewood supplier delivers two cords to a new customer and collects $640 by card on the driveway before unloading, then emails a receipt marked "Paid in full".
Frequently Asked Questions
Does COD mean the buyer has to pay in cash?
No. Despite the name, COD just means payment at delivery. Card, check, mobile payment, and bank transfer are all common.
What happens if the buyer refuses to pay on delivery?
The goods are not handed over. The seller or courier takes them back, and the seller may charge return shipping if the terms allow.
Related terms
- Cash in advance Cash in advance (CIA) is a payment term requiring the buyer to pay the full amount before the seller ships goods or starts work.
- Due on receipt Due on receipt is a payment term meaning the client is expected to pay as soon as they receive the invoice.
- Payment terms Payment terms are the conditions on an invoice that state when and how the client must pay.
- Receipt A receipt is a document that confirms a payment has been received.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.