Payments
COD Payment: what is Cash on Delivery and how to enable it?
June 10, 2023
Cash on delivery, also known as collect on delivery is still the preferred payment method for placing online orders.
When it comes to online shopping, customers expect a fast, convenient, and secure checkout experience. And, limited payment options or complex checkout processes can quickly turn off potential buyers.
And, cash on delivery is a manual payment option that allows customers to proceed checkout quickly.
This tutorial will give you a solid understanding of:
What cash on delivery means?
How to enable cash on delivery for online orders?
What is COD in business?
How to define COD payment terms?
How to deal with COD returns, and more.
But first, let’s talk about what C.O.D. payment means and how it works.
COD payment: what cash on delivery means?
So, what is COD payment and what is COD in business?
Cash on delivery (COD) in business, or “payment on delivery” is a payment method that allows buyers to pay cash upon delivery.
When customers select the cash on delivery payment method at the checkout, they do not need to enter their payment details online. Instead, they can pay with cash upon delivery when they receive the product. This means that buyers can process their orders via COD if the order is virtual.
COD cash on delivery generally refers specifically to payment in cash upon delivery, as the name implies. However, some businesses may offer additional in-person payment options as part of their COD payment, such as pay by check or money order.
Online businesses often enable collect on delivery alongside the local pickup option to make shipping and payment process smooth.
Cash on Delivery vs Cash in Advance
Cash on delivery is a payment method in which customers pay for their orders at the time of delivery. On the other hand, Cash in Advance refers to the payment method in which customers pay for the order before they receive the order.
Cash in advance is a payment arrangement where customers pay for goods before receiving them. This gives sellers the assurance that customers will be compensated for their products before any shipping collect on delivery takes place.
Despite paying in advance, customers usually retain the option to return the items if they are dissatisfied with their purchase. In such cases, the usual return, refund policies, COD terms of payment by the seller apply. These policies and COD payment terms allow customers to get their money back if the products do not meet their expectations.
How to enable Cash on Delivery shopping on your online store?
Uvodo simplifies the payment process for small businesses.
Cash on Delivery platform is one of the built in payment methods that comes within the admin panel upon creating an online store.
When merchants sign up on Uvodo, COD payment is automatically activated as a default payment method. In this case, merchants should only add COD payment terms according to their preferences.
So, cash on delivery by default, is enabled on your Uvodo store. To set up COD payment terms in your Uvodo store, follow these 3 steps.
Step 1: Login to your Uvodo admin panel or create your Uvodo store.
Step 2: Navigate to Settings → Payments.
Here, you'll see that Cash on Delivery is active.
Click on the 3 dots (···) and hit 'Manage'.
Step 3: On the opened window, write down the COD payment instructions, then hit the Save button.
By following these steps, you can quickly and easily offer the COD as a manual payment option in your checkout page.
How to manage Cash on Delivery orders and payment at Uvodo?
The payment status for Cash on Delivery orders is manually set in the Uvodo admin panel.
When a merchant receives an order with Cash on Delivery, the payment status initially appears as "Pending".
Once the ordered item is delivered and the payment is collected, the merchant updates the payment status to "Paid". As a result, the shipping status of the order is automatically set to "Delivered".
How does cash on delivery work?
The process of cash on delivery payment is simple:
Buyer places an order on an online store, and chooses C.O.D. payment as their payment method on the checkout page.
The seller accepts the order on the admin panel.
Next, the seller prepares an item for shipping collect in delivery to the customer's address.
In exchange for the goods, the carrier receives a check, money order, or cash upon delivery and then passes the payment back to the seller.
It's important for sellers to clearly provide COD payment terms in the checkout page.
It's also equally important for buyers to check COD terms of payment before placing an order. COD payment terms will ensure customers that they understand what payment options are available and what is expected upon delivery. This can help avoid dealing with the COD delivery returns.
Types of payment methods for COD payment
To collect on delivery, it’s common for buyers to pay cash upon delivery. However, depending on the COD payment terms, online sellers can offer flexibility to customers to pay with their preferred method:
Cash payment
Card payment
Mobile payment
Check payment
Online bank transfer
Digital wallet
Partial deposit
Cash payment. Customer pays the exact amount in cash upon delivery when the order is delivered.
Card payment. In some cases, the delivery person may carry a POS terminal allowing customers to pay using their debit or credit cards upon delivery. The card payment is processed on the spot, and the customer receives a receipt.
Mobile payment. If the seller adds mobile payments in the COD payment terms, in this case, the customer can use their smartphone to process the payment. with the mobile card reader for the delivered orders.
Check payment. Though less common, some sellers may accept checks as a form of C.O.D. delivery orders. To proceed with the payment, the customer writes a check for the order amount and hands it to the delivery person.
Online bank transfer. Sellers may also offer customers to transfer the payment online to the seller's bank account before the C.O.D. delivery is made. In this instance, the customer provides proof of the transaction to the delivery person.
Digital wallet. Sellers can also offer digital wallet payments for customers to use for Collect on Delivery transactions. In this case, the customer authorizes the payment from their digital wallet at the time of delivery.
Partial deposit. Some sellers may request customers to pay a partial deposit in advance to confirm the order for the collect on delivery, and the remaining amount is paid in cash upon delivery.
Again, online sellers should clearly add the available payment methods to their COD payment terms and instructions.
Payment terms COD
COD terms of payment refers to the instructions that an online seller defines for the buyers on how to pay at the delivery.
It's ultimately up to the seller to determine what types of in-person C.O.D. payment they are willing to accept. They may choose to offer only cash payments upon delivery for simplicity and security reasons. Or, sellers may accept other forms of payment as well, such as a payment terminal depending on their business model and customer preferences.
Also, it’s important to note that the payment terms of COD can vary among sellers and regions. Some sellers may require a full deposit, while others may only ask for partial payment upfront.
In some cases, sellers that offer collect on delivery payment may implement some measures to handle the COD order returns. For this, they may require customers to place a deposit or provide their credit card information beforehand.
How to define COD payment terms?
Collect on delivery allows sellers the flexibility to define payment terms COD by themselves.
To define the payment terms COD:
Write down the available payment options for COD delivery
Create legal pages for your online store such as refund policy, terms of use, and refer to them in the COD payment terms
Make clear instructions of how COD delivery and shipping works
Collect on Delivery: advantages for buyers
Collect on delivery has benefits for both buyers and sellers. For buyer, COD payment has the following advantages:
Convenience & flexibility
No dependency on card payments
Increased brand trust and security
Convenience & flexibility
COD payment offers a convenient payment method that allows customers to pay for orders upon delivery. One of the advantages of collect on delivery shopping is that customers can inspect the product before making the payment, making sure that everything is perfect.
This is particularly important for buyers who are purchasing high-value, fragile items that may easily be damaged during shipping. If there are any issues with the product, such as damage or defects, buyers can refuse to pay for it if it’s written in the COD payment terms.
By allowing buyers to inspect the product before making a payment upon delivery is an ideal way to retain customers, increase satisfaction with your brand.
No dependency on card payments
Cash on delivery shopping has the advantage of not requiring digital payments like credit or debit cards. COD payment is especially attractive to buyers who may not be comfortable with digital payment methods. People who do not use cards in suburban or rural areas can benefit from the collect on delivery payment option.
Online businesses who enable cash on delivery on the checkout page can reach more customers who may not have access to digital payment methods or who may prefer to pay in cash.
Increased brand trust and security
One of the primary concerns that customers have when shopping online is payment security. The reason lies within the rise of online payment fraud and identity theft. For this, many customers are hesitant to provide their credit card information online or use digital payment methods.
Collect on delivery is a useful payment option that does not require customers to reveal their sensitive information.
With COD shopping, buyers have the option to pay upon delivery after receiving the order. This added security can provide customers with peace of mind that there’s no fraudulent activity.
Collect on delivery: advantages for online sellers
Moving forward, collect on delivery provides sellers the following benefits:
Being free from transaction fees
Building trust and attracting new customers
Reducing risks associated with third party payment providers
Being free from transaction fees
COD payment is one of the eCommerce tools for small businesses market. It’s an ideal solution for small businesses as it liberates them from the burden of transaction fees imposed by payment gateways.
By adopting COD payment, small businesses can avoid the additional costs of commission fees and transaction fees.
Building trust and attracting new customers
Online payments may seem risky for many buyers, so they may want to prefer a different payment method. Your eCommerce store appears more trustworthy when you offer the Collect on Delivery payment method as you consider the customer's needs, preferences, and their security concerns.
Also, letting customers know that they can inspect the product and pay on delivery can build trust for your brand.
By offering COD payment options, businesses can expand their customer base and increase their sales. Online sellers can cater to buyers who may not have access to digital payment methods or who may prefer to pay in cash upon delivery.
Reducing cart abandonment
Studies show that 6% of shoppers abandon their baskets due to a lack of payment options.
Providing multiple payment options is key to winning and retaining customers in the competitive world of eCommerce.
Offering collect on delivery as an additional payment option can reduce the cart abandonment rates on your online store.
In the 2018 study, PayPal found that30% of online shoppers abandon a purchase if their preferred payment method was not available.
The disadvantages of Collect on Delivery for online sellers
Though C.O.D. payment offers a lot of advantages for both sellers and buyers, it has some minor drawbacks. These drawbacks are:
Possibility of stockout and waitlists
Risk for sellers
Increased return rates
Possibility of stockouts and waitlists
When customers place bulk orders to try different sizes or colors, it can lead to stockouts of popular items. This can cause frustration among other shoppers who may have to wait for restocking.
No guarantee of order success
Collect on delivery may involve a risk for sellers as they ship orders without a guarantee that a customer will keep and pay for it. This may result in loss in shipping collect on delivery & carrier resources.
Increased return rates
COD payment may result in increased return rates, which can be costly for sellers to process, leading to potential losses in profits.
How to deal with COD returns?
What are COD returns? COD delivery returns refer to orders that are returned to the seller. This can happen when the customer chooses not to accept or pay for the product upon delivery.
Collect on delivery can lead to higher order return rates. COD returns potentially cause losses in profits and unnecessary additional shipping collect on delivery costs for online businesses.
Common reasons behind these returns can be weak product descriptions, impulsive orders, and unclear COD payment terms.
To address these issues and lower the cash on delivery returns, you can practice the following:
Improve product descriptions
Charge deposit for COD
Implement order confirmation
Have transparent COD policies
Educate customers
Improve product descriptions
Make sure that product description and images are accurate. By displaying every product detail with text and visuals, you leave no room for collect on delivery COD returns. This way, customers will have a clear idea of what to expect from the ordered item before the delivery.
You might also like to read: Product page SEO best practices.
Charge deposit for COD
You may also consider taking a small deposit at the time of COD order placements. This is a good indicator of customers willingness to pay for the order and accept delivery and can reduce the likelihood of rejections.
Implement order confirmation
You can get in contact with the customers via SMS, email, or call to ensure that they are committed to their collect on delivery purchases. This can help you reduce impulsive orders which lead to rejections afterwards.
Have transparent COD payment terms
When writing C.O.D. payment and delivery terms, clearly communicate the policy and cash on delivery instructions. Write the COD payment plan or any additional fees or charges associated with rejected orders if you have them.
Educate customers
Finally, you educate customers about the consequences of rejecting collect on delivery orders. By knowing the additional delivery costs, the impact of rejection on your online business, this can encourage customers to be responsible for purchasing behavior.
FAQ on Cash on delivery
What is COD payment?
COD payment is a manual payment method that allows buyers to pay for their virtual orders upon delivery, usually with cash. Online sellers define COD payment terms, and buyers pay for orders based on those terms.
What is COD shipping?
COD shipping is a process of shipping for collect on delivery orders. Shipping of collect on delivery is the same process, but mostly applies for local selling.
What Cash on Delivery means?
Cash on Delivery (COD), also known as collect on delivery is a payment method that allows buyers to order online and pay for the order at the time of delivery.
What are COD returns?
COD returns are products that customers refuse to accept or pay for when the delivery is made in a cash on delivery (COD) transaction.
Can I accept COD if the order is virtual?
Absolutely. If you prefer paying for your order at the time of delivery, you can select COD at the checkout page while the order is virtual.
How does COD cash on delivery work?
Cash on Delivery shopping is simple. Online sellers define the Cash on Delivery instructions from Uvodo admin panel settings and enable Cash on Delivery. Once enabled, COD payment appears on the checkout page. Next, customers place the order and choose the COD as a payment method. Once the order is delivered, the courier collect payment on delivery.
What is COD in business?
In business, COD stands for "Cash on Delivery." Cash on Delivery is one the eCommerce tools for small businesses market. This payment method allows a customer pays for a product or service at the time of delivery, usually in cash or by other means like credit card or check.
How does Cash on Delivery work for the seller?
The seller defines the Cash on Delivery instructions on the admin panel and enables it. Once the order is accepted, the seller manually updates the payment and order status for Cash on Delivery.
Is Cash on Delivery available in USA and UK?
Yes! As the best eCommerce platform for small businesses operating globally, Uvodo allows sellers to use Cash on Delivery payment method globally.
How to manage tax for Cash on Delivery payments?
eCommerce businesses can consider using cash accounting when handling the Cash on Delivery (COD) payments.
In cash-based accounting, a COD in business only records revenue when the payment is received. So, if a customer buys something, the business won't consider it as revenue until they receive the payment.
Enable Cash on Delivery on your store
Overall, the Collect on Delivery payment method is a win-win for both customers and sellers. Customers get the convenience and peace of mind that comes with paying cash upon delivery. Meanwhile, sellers can increase their sales, expand their customer base, and build trust with their customers.
Uvodo allows online sellers to sell via Collect in Delivery with its Cash on Delivery platform without integrating any third-party tool.
Cash on Delivery a default payment method for Uvodo stores alongside the Uvodo Payments.
Check our guide to how to add Cash on Delivery payment terms.
Sign up to Uvodo to create your free online store and enable various built-in payment methods, including Cash on Delivery to accept payments easily.
