Cash on delivery (COD) is a payment method that requires buyers to pay for goods or services upon delivery, rather than in advance or with a credit allowance of a grace period post delivery. This eliminates the need for upfront payments and allows customers to be sure of what they are getting before paying for it.

COD has been a popular payment method for many years, particularly in industries where online payment options are limited or not available, or where perishable orders are commonplace, as it gives buyers more flexibility to purchase items without having to make a large payment before they receive the goods. While However while COD can provide flexibility, convenience and security for buyers, it also comes with implications for distributors. 

In this blog, we will explore the pros and cons of COD for both buyers and distributors, as well as the specific challenges faced by food distributors. Additionally, we’ll discuss an alternative to COD, accounts receivable automation, and how it can benefit distributors. By the end of this blog, you’ll be equipped with the knowledge to make an informed decision about whether to continue using the COD payment method, or to explore more efficient options that can revolutionize the way you do business.

Cash to Digital Wallets: The Evolution of COD Payment Methods

COD payment can be made in a variety of ways, depending on the distributor’s preferences. Typically, COD payments are made using cash or a check, but digital payment options have become increasingly popular.

If the buyer is located nearby, the distributor may send a delivery person to the buyer’s location with the purchased product or service, and the buyer will provide the cash or check payment directly to the delivery person. For remote buyers, the seller may use a third-party courier service to deliver the product and collect the payment. 

In recent years, digital payment options, such as mobile wallets, have become popular for COD payments. In these cases, the buyer can use their mobile phone to make a payment directly to the seller or delivery person. Examples include using Google PayApple Pay, and Samsung Pay at the time of delivery. 

Regardless of the payment method used, the key feature of COD is that payment is not made until the product or service is delivered

Cashing in on Convenience? COD Payment for Buyers

When considering the use of cash on delivery (COD) as a payment option, it is essential to examine the advantages and disadvantages that it presents, not only for the buyer but also for the distributor.

Pros of COD for BuyersCons of COD for Buyers
Buyers can inspect the product or service before making payment, providing convenience and security.COD is not always available as a payment option, particularly for online purchases. This can limit choices and require buyers to use alternative payment methods.
COD is an ideal payment option for buyers who do not have credit cards or bank accounts.Because payment is not made until delivery, there may be a delay in receiving the product or service. This can be inconvenient for buyers who require the product or service urgently.
Buyers do not need to make any upfront payments, and only need to pay for the product or service upon delivery, which can be more manageable for some buyers.If the payment is made in cash, there is a risk of theft or loss during delivery. This can be particularly problematic for high-value items, and buyers may be hesitant to use COD for these types of purchases.


Overall, COD provides convenience and security for buyers, but it also has its limitations, particularly when it comes to availability and delayed delivery. Buyers should weigh the pros and cons carefully before deciding whether to use COD as a payment option.

Assessing the Advantages and Disadvantages of Cash on Delivery (COD) for Distributors

When it comes to cash on delivery (COD), the discussion often focuses on the benefits for buyers. However, COD also has important implications for distributors who offer it as a payment option. 

Pros of COD for DistributorsCons of COD for Distributors
Reduces the risk of non-payment, as payment is received at the time of deliveryIncreased administrative burden of handling cash or checks, which can be time-consuming and increase the workload of staff
Does not require distributors to pay transaction fees to third-party processors, helping to reduce payment processing costsLimited customer base, as some customers may prefer to use credit cards or other online payment methods
Improves cash flow, as payment is received immediately upon delivery, rather than having to wait for payment terms to expireCan lead to higher delivery costs, as drivers must handle cash and take additional steps to manage payments
Can potentially increase the risk of theft or fraud if cash is not handled securely or if checks bounce


Distributors must carefully evaluate the advantages and disadvantages of COD when deciding whether to offer or continue to offer this method as a payment option. On the one hand, COD can help to reduce the risk of non-payment, which is especially important for small businesses with limited cash reserves. However on the other hand, COD can introduce administrative burdens and risks surrounding handling cash or checks and managing security issues.

Downfalls of Cash on Delivery for Food Distributors

Cash on delivery (COD) can have unique implications for food distributors, who must manage the complex logistics of delivering perishable products while also ensuring timely payment from customers. 

In the food industry, the average time to collect payment is around 27 days, which is significantly longer than in many other industries. This delay in payment can create serious cash flow problems for food distributors, who may have to cover the costs of production, transportation, and storage while waiting for payment to come in. COD can help to address this issue by providing immediate payment upon delivery. However, there are also important drawbacks to consider. 

Managing cash or checks can be especially challenging for food distributors, who must ensure that payments are securely handled and accurately recorded. Cash and checks can be cumbersome to handle, transport, and deposit, especially for distributors who operate across a wide geographical area. This transport process opens up the possibility for theft and fraud. As a result, distributors may need to hire additional staff, security, or incur extra costs to manage and transport cash or checks. 

Further, one of the biggest drawbacks of cash on delivery (COD) for distributors is the administrative burden it can introduce. With COD, distributors must manually record payment information, reconcile invoices, and handle cash or checks, which can be time-consuming and prone to errors. This can lead to delays in payment processing and cause further administrative headaches down the line. As such, while COD can provide immediate payment, it can also require significant manual entry processes and time spent on payments for distributors. Further, these manual processes increase the risk of human error, such as misplacing or miscounting funds, which can result in lost revenue and additional administrative costs.

Another important consideration is the potential impact of COD on customer relationships. While some customers may appreciate the convenience and flexibility of COD, others may prefer other payment options, such as credit cards or online payment systems. In some cases, offering COD exclusively may lead customers to perceive a lack of trust in the distributor’s creditworthiness or financial stability.

Alternatives to Cash on Delivery

To address these challenges, many food distributors are exploring alternative payment options that can help to streamline payment processing and improve cash flow. For example, some are turning to accounts receivable (AR) automation

Accounts Receivable (AR) automation refers to the process of using technology tools to optimize the payments collection process. including automating payment processing tasks such as generating invoices and reconciling payments received. With AR automation, distributors can send invoices electronically, set up automatic payment reminders, and process payments online. This eliminates the need for manual payment processing and reduces administrative burdens, ultimately saving time and resources. With features like automated payment reminders, customers are still prompted to provide timely payment, which also improves payment collection rates making AR automation a viable alternative to COD. 

AR automation also provides several other benefits for food distributors. For example, distributors can access real-time payment data and analytics, allowing them to quickly identify outstanding payments, track payment history, and optimize cash flow. Additionally, distributors can reduce the risk of fraud and errors by automating payment processing, eliminating the need to handle cash or checks.

Notch, a leading provider of AR automation software, offers a range of solutions specifically designed for food distributors, helping them to improve payment collection and reduce the risk of non-payment.

Overall, by adopting AR automation, food distributors can reduce administrative burdens, improve payment collection rates, and gain greater visibility and control over their cash flow. While COD may offer some benefits, the challenges associated with managing cash and checks make it an increasingly outdated and inefficient payment method. By exploring alternative payment options like AR automation, food distributors can position themselves for long-term success in an increasingly competitive industry.

Are COD Payments right for your business?

In conclusion, cash on delivery (COD) has traditionally been a popular payment method for food distributors, allowing buyers to pay upon delivery. However, COD comes with its own set of challenges and drawbacks, including increased administrative burdens and the risk of payment delays. 

When it comes to food distributors, COD can have unique implications due to the perishable nature of their products and the long payment cycles in the industry. While COD can provide immediate payment, it can be challenging to manage and is not the best fit for all customers in today’s competitive market.

Regardless of industry, distributors should carefully evaluate the pros and cons of COD, and consider alternative payment options such as accounts receivable (AR) automation. By automating payment processing and reducing the need for manual data entry, AR automation can help to improve payment collection rates and reduce the risk of non-payment. This, in turn, can help to improve cash flow and ensure long-term financial stability.

Ultimately, the decision to offer COD or alternative payment options will depend on a range of factors, including the needs of your customers, your cash flow requirements, and your internal administrative capabilities. 

While it may take time to adjust to a new payment system, the benefits of AR automation can be significant, allowing distributors to focus on growing their business and providing excellent service to their customers. As technology continues to evolve, it is likely that we will see even more innovative payment solutions emerge, providing food distributors with new opportunities to streamline their operations and stay ahead of the competition.

Learn more about payments for food and beverage companies: Payments 101 for Food and Beverage Companies Guide