Cash on Delivery (COD)

Cash on delivery (COD) requires payment at the point of delivery: the driver or carrier collects a check or certified funds before handing over the goods. It is one notch looser than cash in advance, since the seller commits inventory and freight before being paid, but far tighter than open account. COD suits local delivery businesses, building-material and food-service distribution, and accounts on credit probation.

COD has real operational risk that CIA does not. If the customer refuses or cannot pay at the door, the seller eats round-trip freight and handling and may get back damaged or unsellable goods. If company checks are accepted for COD, the seller has effectively extended a few days of unsecured credit anyway, and a bad check converts the sale into a collection problem with the goods already gone. Policies should specify acceptable tender (certified funds versus company check) by account risk grade.

In credit operations, COD functions mainly as a disciplinary and probationary status. Moving a chronically delinquent account from net 30 to COD keeps the revenue relationship alive while capping new exposure at a single delivery, and the friction it imposes on the customer's operations is itself an incentive to cure the arrears and earn terms back.