Payment terms
COD (Cash on Delivery)
COD (cash on delivery) is a payment term where the buyer pays the full amount at the moment goods or services are delivered, rather than before or after.
What COD means
COD stands for cash on delivery, sometimes called collect on delivery. Under COD terms, payment is collected at the point of delivery: the buyer hands over money (or a card or digital payment) the instant the goods or completed service arrive. Nothing is released until payment clears.
COD sits at the strict end of the payment-terms spectrum. With net terms the customer gets time to pay after delivery, but with COD there is no credit at all. The exchange of goods and payment happens together, which protects the seller from non-payment.
When to use COD
COD works best for physical product delivery and for situations where you are not yet comfortable extending credit. It is a common choice for first-time customers, walk-up orders, and any buyer you consider higher risk, because the seller never parts with the goods without being paid.
The tradeoff is friction. The buyer must have payment ready at delivery, drivers or staff have to handle collection, and refused deliveries waste a trip. For trusted repeat clients, looser terms such as Net 15 or Net 30 are usually smoother. Reserve COD for new or risky accounts and high-value drop-offs.
Example: A furniture shop schedules a sofa delivery on COD terms. The driver arrives, and before unloading collects the 250 dollar balance from the customer. Only after payment is taken does the driver hand over the order.
FAQs
Frequently asked questions
Does COD mean cash only?
Not necessarily. COD originally meant cash, but most sellers now accept cards or digital payments at the door. The key idea is that payment is collected at delivery, whatever the method.
When should a freelancer or business use COD?
Use COD for product deliveries and for first-time or higher-risk customers where you do not want to extend credit. It guarantees payment because goods are never released without it.
How is COD different from payment in advance?
With payment in advance the buyer pays before anything ships. With COD the buyer pays at the moment of delivery. COD is slightly less strict because the buyer can confirm the goods arrived before paying.
Related terms
PIA (Payment in Advance)
PIA (payment in advance) is a payment term where the client pays the full amount before any work starts or goods are shipped.
Due on receipt
"Due on receipt" is a payment term meaning the client is expected to pay the invoice immediately upon receiving it, rather than within a set number of days.
Net 30
Net 30 is a payment term that means the full invoice balance is due within 30 days of the invoice date.
Put it into practice
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