A cash-on-delivery transaction can take different forms and may affect a company’s accounting in different ways. Public companies are required to use the accrual accounting method under generally accepted accounting principles (GAAP). With accrual accounting, a company recognizes revenue at the time of the transaction and records the payment in accounts receivable if the payment is deferred.
Private companies can use either accrual or cash accounting. In cash accounting, the company must wait to record the transaction as revenue until payment is received.
If a customer is dealing with a merchant in person, and the customer makes a purchase from readily available inventory, payment is collected at the time of sale as a form of cash on delivery. Under the accrual accounting method, this leads to a shorter accounts receivable period and higher efficiency. For longer-term accounts receivable agreements, companies can set up COD shipping that allows the customer to defer payment until the time of delivery. On certain mail order platforms, such as eBay, COD can be used to help minimize the risk of fraud between buyers and sellers. Overall, COD does not require payment from a purchaser until they have received their purchase.
After delivering soap instead of the latest iPhone, scammers have now become smarter and have found a new way to cheat online shoppers. You may now get a call from someone claiming to be a delivery executive of an e-commerce company asking for money for a ‘cash on the delivery order.
If you get a call or SMS from a courier delivery service or a company shipping your online order, be very careful about what you say or do. A typical scam might go something like this: Someone contacts you and offers brand-name products at below-retail prices. The caller knows your name, your business, and your community. He explains he is responsible for unloading excess inventory and you can pay for the order COD.
Before entering into a COD agreement with any company, verify its legitimacy. Start with an online search of the company name to make sure it actually exists. Look for any negative comments associated with the company. If you have any questions about the reputation of the company, contact your local Better Business Bureau or state consumer protection agency to see if they have recorded any complaints. In today’s digital marketplace, most scams take place online. If you are an individual buying merchandise online, the best way to avoid fraud is to use a credit card or a service such as PayPal that allows you to dispute bogus shipments. If those options are not available or you prefer to pay COD, make sure you are doing business with an established service such as eBay that takes great pains to monitor and weed out unscrupulous sellers. If you decide to accept merchandise COD, look for telltale signs of mail fraud.
Verify the return address is correct. Make sure the package has been processed and stamped. If the package appears to be over-wrapped to the point of being difficult to open or it appears damaged, do not accept it. Most importantly, verify the identity of the delivery company and the person making the delivery by asking for official identification. All reputable delivery services arm personnel with the appropriate identification. If the merchandise you didn’t order arrives COD, send it back. Double-check of product details with the transaction is required.
