If you’re a business owner who sends or receives freight regularly, you’ve no doubt heard of Cash on Delivery. But what is it? And what are the dangers involved?
In this blog post, we’ll be sharing (based on our own real experiences) what is cash on delivery and how we lost thousands of dollars from one of own staff members in a previous logistics business. Plus, we’ll also share how you can safe-guard yourself as a business owner.
Answering the question
Let’s begin with the straight answer:
Cash on Delivery is a term used to describe the payment of goods upon delivery. This is in contrary to the normal practice of payment in advance, where goods are purchased then subsequently delivered. Cash on Delivery, also known as COD, is a term used often in the freight and logistics industries, but is slowly being phased out in lieu of digital payments and business credit accounts.
Many countries still use the COD system. Many of our clients in Australia and New Zealand have transitioned away for various reasons, or have found greater security through using our cloud-based solution.
Advantages of cash on delivery
Whilst we’re not advocates of using the COD process, there are still some that use it for these reasons:
- Businesses short on cash flow can make payment and instantly receive goods, instead of waiting days or weeks for arrival.
- Allows the sender to receive instant payment instead of waiting (and taking risk) for the payment through a credit account.
- Provides a chance for the customer to review and audit the product prior to making payment to the delivery driver, thereby reducing returns and future customer friction.
These advantages can still mostly be found in a delivery software solution, such as what we currently offer to thousands of users across Australia and New Zealand.
Disadvantages of cash on delivery
The main disadvantage of Cash on Delivery is intentional driver theft. If you have poor systems in place, then some drivers can take advantage through stealing customer payments, either in bulk or in small parts. We lost $8,000 through this fundamental error, and we have clients who have had bigger losses.
The second disadvantage is simply unavoidable staff errors. Paper-based systems generally aren’t reliable as often personnel have poor handwriting. Others may misplace paperwork, including payments received from customers for freight deliveries. Some may even misread the monetary amounts that are needed to be received.
Another disadvantage is the additional manual data entry which is required. A staff member in the office will be required to reconcile both the money and photocopy any paperwork, leading to additional work hours. If you have dozens of COD customers, then this can become an administrative nightmare.
Eliminating COD headaches
If you wish to avoid some real disadvantages that Cash on Delivery creates, then consider CartonCloud. Our software still allows drivers to receive cash on delivery payments, with the amounts and signatures updated in real time at base stations.
We’re currently helping hundreds of clients across Australia, New Zealand and SE Asia. Give us a call to see if we can eliminate the headaches in not just COD, but in many aspects of freight delivery and warehousing operations.