Full Form of COD

Full-Form of COD (Cash on Delivery)

Full form of COD stands for Cash on Delivery. It can be defined as a modern mode of payment system made for online purchases under which buyer buys goods from online platforms, websites, etc and processes its payment at a later date i.e. at the time of receipt of the goods either in cash or by debit/credit card via the delivery agent.

How does COD Works?

  • This is the easy mode of payment. Under this payment system, the delivery agent collects the bill amount against an order from its consignee in cash once the consignment is delivered. The cash collected is then deposited at the nearby office of the e-commerce company which sold the goods. This is one of the easiest, convenient, and satisfactory payment modes for both buyer and seller.
  • Also, money handling becomes easy and evacuates complex processes making it further convenient for the seller. Sales proceeds are instantly realized, ruling out the possibility of payment failure.
  • For the buyer cash on delivery, a mode is a more safe payment option as it is processed only after the consignment is delivered, and the buyer is satisfied with the goods delivered. In case the product is damaged or has been wrongly delivered, the buyer may reject the package.
  • This process involves the placement and execution of the order. Payment is processed to the supplier by the buyer once the product gets delivered. This process starts from the moment the order is placed.
  • Generally, e-commerce companies ship sold product/ consignment through their internal logistics or hire a separate logistic partner to deliver consignment and collection of payments.
  • Once the order is placed with the e-commerce company, the consignment is sourced from a supplier, then an invoice cum delivery challan is prepared, which is attached with the consignment for easy delivery.
  • After which the consignment with the attached invoice is handed over to the logistics company to deliver the order to its destination and collect the payment. Moving further, the delivery man takes the consignment to the buyer and collects the payment at his doorstep in the form of cash or card payment.
  • For card payment, the delivery executive carries a card swiping machine. After collecting the billed amount, the agent deposits the collected amount in his office, which the logistics company, in turn, hand over to the supplier after deducting the handling charges.
Full Form of COD

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Factors

Factors of COD

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  1. Convenience – Cash payment has always been a convenient method of trading. Cash payment involves hassle-free transactions.
  2. Lack of Secure Payment Gateways – Online threat such as hacking involves the risk of money. When the secure payment gateways are not available, it leads to the loss of customer’s money.
  3. Familiarity with Cash Payments – Since the time, a large number of people have dealt in cash only. Therefore the mode of cash payment is the easiest option for any individual as there is always reluctance among people to the adoption of changes taking place in the business environment.
  4. Less Credit/Debit Card Users – Penetration of credit and debit cards is still not too much among the citizens. Banks charge a certain amount of money on credit and debit cards, which leads to less usage of these cards.

Cash on Delivery vs Online Payment

  1. Cash on delivery is simple, easy, and convenient as it does not require any information technology knowledge. Also, no banking medium is involved in cash on delivery mode of payment. It is more acceptable, reliable, and satisfactory since the payment is made only after the product is delivered.
  2. While online payment is much faster, it involves third party intervention and risk of interruption in payment if the payment gateway halts or gets stuck at any point. This is suitable only for those customers who are well versed in technology. It is cheaper for both sellers and buyers as it saves the cost of a collection agent who delivers the product on the seller’s point, while for a buyer, it provides many discounts and offers in online payments. Also, today’s money is always more valuable than money acquired after some time (considering the time value of money).

Importance

The greatest importance of cash on delivery is trust. Once received at the doorstep of a customer, the product is reviewed, checked, and then only the payment is processed. All the major e-commerce companies like amazon offer the service of cash on delivery.

  • These transactions are hassle-free as this involves just handing over cash and taking the product. No involvement of third parties in between buyer and seller.
  • The product can be returned easily if the customer is not satisfied with the product, and the money is deposited back in the bank.
  • There is risk in online payment methods such as net banking, credit card, and debit card as these are more susceptible to fraud, so it turns out to be a more secure payment option.

Advantages

Disadvantages

  • Prone to Losses – Under this payment method, the seller is more vulnerable to losses when the customer returns the product without paying for it, the cost of delivering the product, which is incurred by the seller.
  • More Expensive – Courier companies charge an extra amount when opting for cod. The seller feels it difficult to bear the burden of this cost.
  • Suspicious Orders – Sometimes, as a part of mischief, someone may post fake orders on cash on delivery with the wrong address. Processing delivery of such orders will lead to losses.

Conclusion

  • It can be defined as mode payment under which the buyer processes payment for goods only after receiving goods/consignment at his/her doorstep.
  • Usually, the seller has in the house, or a tie-up with a courier agency that delivers goods to the buyer collects the sale process and deposits the same to the seller’s bank a/c after deducting its charges. This is a more convenient, easy, secure mode of processing payment, but at the same time, it adds to the cost of the seller and thus reducing profits.

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