Cash on Delivery for Online Stores: Why Customers Choose It and How to Control Costs

Cash on delivery (COD) lets customers pay for goods when they receive them. A store should offer this payment method with clear terms: tell customers the full purchase price in advance, confirm the shipment, explain what inspection is available, and track delivery and returns. Evaluate performance by completed orders and their costs, since the number of parcels shipped alone does not show the financial result.

Start with a brief order confirmation and a single shipment register. Ask why customers choose COD and why they do not collect parcels, without making assumptions about their character or ability to pay. The legal guidance below applies to sales by a Ukrainian store to consumers in Ukraine; purchases made for business needs should be assessed separately.

How to Find Out Why Customers Choose Cash on Delivery

Treat reasons for choosing COD as hypotheses to check in your own store. Someone may be buying from you for the first time and want to make sure the order arrives. Another customer may find it more convenient to pay on receipt, while someone else may expect to inspect the goods if the carrier allows it. The payment method alone does not explain an individual customer’s motive.

Offer an optional question during checkout or after a successful purchase: “What mattered most in your choice of cash on delivery: this is your first order with us, the option to inspect the goods, the convenience of paying on receipt, or something else?” Let customers skip the question. Record the customer’s answer separately from a manager’s assumption so you do not later analyze guesses as facts.

• If a customer lacks confidence in a first order, show the seller’s details, contact information, return procedure, and a clear product description. Check that these pages are easy to find from the product page and cart.
• If the customer expects to inspect the goods, ask what they want to check. Compare that with the rules for the chosen carrier, shipment type, and specific product before agreeing to delivery.
• If payment convenience matters, tell the customer which payment methods are available at the selected pickup location after checking their terms. Do not promise a particular way to debit funds just because it is available through another service.
• If the customer cares about the delivery date, agree on the dispatch date and provide the expected delivery time. Ask whether the purchase is still relevant if the goods arrive later.

Check the effect of changes systematically. For example, first add the full amount due to the order confirmation, then compare the share of uncollected shipments and the contribution toward costs across comparable order groups. Account for product category, carrier, and promised delivery time: a difference between groups does not, by itself, prove that the new message caused it.

What to Tell Customers Before Dispatch

Under parts 2–3 of Article 13 of the Law of Ukraine “On Consumer Protection,” dated 12 May 1991, No. 1023-XII, before a distance contract is concluded, the seller must provide, among other things, information about itself, the product’s characteristics, the price including delivery, payment, delivery, and the procedure for terminating the contract. This information must be confirmed in writing or electronically; the seller may not unilaterally change the confirmed terms. Article 7 of the Law of Ukraine “On Electronic Commerce,” dated 3 September 2015, No. 675-VIII, also sets requirements for making online sellers’ details available.

In practice, customers need one clear confirmation they can save. A link to the terms helps them read the details, but the main parameters of the specific order should be stated directly in the message. Legal basis: Article 13 of Law No. 1023-XII and Articles 7 and 11 of Law No. 675-VIII.

1. Check the order contents. Include the product name, SKU, quantity, size, color, and configuration if these affect the customer’s choice. Verify actual stock before confirming.
2. Show every part of the payment. List the product price, delivery fee, and COD transfer fee separately, along with who pays each amount and to whom. If the final rate depends on parcel specifications, calculate it after packing and agree on the amount before dispatch.
3. Distinguish dispatch from delivery. Tell the customer when the store will hand the goods to the carrier and the expected arrival time. If there is a delay, let them know and agree on what to do next.
4. Confirm the destination. Check the locality, branch or address, recipient’s name, and contact details. It is easier to fix an error before the parcel is handed over.
5. Explain inspection and returns. Include links to the rules for the relevant carrier service and to the store’s terms. Do not imply that inspecting a parcel at a branch is the same as checking every product feature in full.

Illustrative full-price example: the product costs UAH 1,000, delivery is UAH 80, and the COD transfer fee is UAH 30. If the customer pays all three amounts on receipt, the total they will pay is UAH 1,110. These figures are for illustration only; the store should use the rates for the specific shipment in its actual confirmation.

How to Explain the Option to Inspect the Goods

Before promising that inspection is available, the responsible employee should check the carrier’s current rules for the selected service and product. Separately check the terms for opening the package, verifying contents, switching on equipment, or trying on an item if the customer expects to do so. Save a link to the relevant terms in the order so managers can give consistent answers.

A calm way to phrase it to the customer: “Before dispatch, we’ll check what inspection is available for this product under the selected carrier’s rules. If you need to try it on or check how it works, please let us know in advance.” After checking, give a specific answer. A blanket promise that “you can open and check everything any way you like” creates expectations the store may not be able to meet.

How to Confirm Orders and Remind Customers to Collect Them

Article 11 of the Law “On Electronic Commerce” requires prompt confirmation that an order placed through an information system has been received. In your process, distinguish a message acknowledging the request from agreement on the specific dispatch terms. If the contract already defines the confirmation procedure, the manager should follow it so an extra call does not delay an agreed delivery.

During checkout, let customers choose a convenient channel and opt into service reminders for that order. Record their choice, do not add marketing offers to these messages without a separate proper legal basis, and stop optional reminders if the customer asks. The law provides an applicable basis for processing data needed to conclude and perform a contract; consent is not the only possible basis. Requirements concerning the purpose, scope, and legal bases for processing are set out in Articles 6 and 11 of the Law of Ukraine “On Personal Data Protection,” dated 1 June 2010, No. 2297-VI.

A recommended sequence is to confirm the terms, notify the customer about dispatch, and, if needed, send an agreed reminder once the parcel arrives. Before each message, the employee should check the parcel’s actual status. This helps avoid reminding someone to collect a parcel they have already picked up or declined.

Examples of Calm Messages

Confirming the terms: “Hello. We’re confirming order No. [number]: [product and characteristics]. Product price: [amount]; delivery: [amount]; COD transfer fee: [amount]. Total due: [amount]. We plan to dispatch on [date], with expected arrival in [time frame]. Delivery to [location]. Inspection and return terms: [link]. Please check the details and confirm dispatch.”

Agreeing on reminders: “Would you like to receive a dispatch notification and a reminder here if the parcel is waiting for collection? We’ll use this channel to follow up on your order.”

After arrival: “Hello. According to the carrier, order No. [number] has arrived at [location]. Tracking number: [number]. Under the terms of this shipment, storage is free until [date]. If you no longer need the order or are having difficulties, please message us so we can agree on what to do next.”

After the customer reports declining the parcel: “Thank you for letting us know. We’ve recorded your request about order No. [number]. We’ll check the shipment status and let you know the process for returning the goods and settling the amounts for your order.” If the customer has not given a reason, you may offer a brief optional question without delaying their request.

How to Handle a Refusal and Whether You Can Keep an Advance for Delivery

Under part 4 of Article 13 of Law No. 1023-XII, a consumer may notify the seller of termination of a distance contract within 14 days from confirmation of the information or receipt of the goods or first delivery. Returning a physical item also indicates termination of the contract. If the information confirmation does not meet the requirements of part 3 of Article 13, the termination period is 90 days from the date the information is received, or, for physical items, from receipt of the goods or first delivery. If the confirmation is corrected during this period, the consumer may terminate the contract within 14 days of receiving the corrected confirmation.

The exceptions to the right to terminate, defined in part 5 of this article, apply unless the contract provides otherwise. For a retail store, an exception may be relevant when goods are made or altered for a specific consumer and cannot be resold to someone else, or doing so would cause substantial financial losses. Merely describing an item as “made to order” does not establish that this exception applies. Separate terms apply, among other things, to opened sealed software media and delivery of periodicals; use only an exception that fits the actual goods and contract.

Do not impose a blanket “delivery advance is non-refundable” term. An agreed advance does not, by itself, cancel the consumer’s right to terminate the contract. Part 7 of Article 13 also applies parts 5–9 of Article 12 of this law to distance contracts, so settlements upon termination must be assessed in light of all applicable provisions. Do not automatically deduct shipping costs from any advance solely on the basis of the store’s internal rules. Source: Article 13 of Law No. 1023-XII.

1. Record the date of the customer’s request, what they are asking for, and the shipment’s current status. Distinguish a reported refusal from a case where the customer simply did not collect the parcel.
2. Ask for the reason if the customer is willing to provide it. Incorrect order contents, damage, delay, and a change in the customer’s needs call for different next steps.
3. Check whether the right to terminate applies, the terms of the specific contract, and the settlement procedure. Explain the decision to the customer rather than simply referring them to an internal rule.
4. After the goods are returned, physically check the product and its contents. Record its condition, costs, and documents, and assess whether it can be resold after inspection.
5. Account for the refund and stock adjustment separately. A parcel arriving back at the warehouse does not mean all settlements are complete.

To reduce unnecessary shipments, give customers an easy way to cancel an order before it is handed to the carrier. The manager should promptly remove it from picking and notify the warehouse. Agree on the delivery procedure in advance as well: part 6 of Article 13 provides for delivery within a reasonable time, but no later than 30 days after receiving the consumer’s consent, unless the contract specifies otherwise.

How to Handle Repeat Non-Collection Without Illegal Lists

Order history is useful when it records verifiable events. “Two shipments were returned after the storage period ended; the customer did not give a reason” is more accurate than labeling someone an “unreliable customer.” Before drawing conclusions, check whether the store entered the correct address, met the agreed deadline, and stated the full amount.

A practical process for a repeat case is to assign the new order to a manager responsible for checking the details. They can reconfirm the pickup location and time, check whether the purchase is still relevant, and offer delivery and payment methods available under the store’s terms. Any changes to a contract already concluded must be agreed upon; advance-payment terms must not deprive consumers of their legal rights.

Do not publish customers’ phone numbers and names in public “blacklists” or share them with other sellers without a proper legal basis. For internal records, define a lawful purpose, limit access to relevant employees, and set a retention period; correct inaccurate information. Articles 6 and 11 of Law No. 2297-VI require data to be accurate and not excessive, and processing to have a proper legal basis; non-collection alone does not give a store an unlimited right to disclose information about someone.

What Register to Keep to Track Cash on Delivery

Create a register with a separate row for each shipment, linked to the order number. If a parcel is sent again, add a new row and link it to the previous attempt. This lets you see the cost of each shipment and avoid counting one purchase twice.

Every day, check shipments awaiting collection, being returned, or already handed over but not yet reconciled with the transfer. To compare results, group parcels by dispatch date and calculate metrics after their status is known. Show deliveries still in progress separately; include later returns when updating the totals for that same group.

Non-collection rate for a completed group is the number of shipments returned without being handed to the customer, divided by the number of parcels dispatched, multiplied by 100%. Count returns after collection separately, since the goods were already handed over and may have different costs. For partial returns, also analyze the number and value of the returned items.

How to Calculate Order Contribution: Two Illustrative Scenarios

For management analysis, you can use contribution toward fixed costs: revenue from goods customers keep, minus their cost of goods and the variable costs of the entire shipment group. This is not net profit yet: the contribution must still cover rent, fixed payroll, and other costs not included in the calculation. In this example, payments customers make directly to the carrier for its services are not included in store revenue.

Illustrative assumptions: in each scenario, the store dispatches 100 parcels, with one product in each. The product price is UAH 1,000, its cost is UAH 600, and variable costs for a successful sale are UAH 100, so the contribution from one sale without a return is UAH 300. An uncollected parcel costs the store UAH 180, and a full return after collection costs UAH 220; these amounts already cover all variable costs of the respective unsuccessful sale and are not added again.

Assume all returned goods can be resold at the original price, their cost remains in inventory, and customers receive a full refund from the store for returned goods. Taxes and fixed costs are excluded from this simplified calculation. In Scenario B, the store also spends UAH 20 following up on each shipment, for a total of UAH 2,000; the results are assumptions for comparison, not a forecast of reminder effectiveness.

Under these assumptions, Scenario B yields UAH 2,800 more contribution for the group, or UAH 28 more per shipment, after the additional follow-up costs. For your own decision, use the store’s actual costs, including unsuccessful shipments and markdowns. If lower non-collection comes with deeper discounts or higher service costs, check their effect on contribution before expanding the practice.

What Receipt Is Required for Cash on Delivery

For fiscal accounting, distinguish the sale of goods from the payment service used to transfer funds. A document from a payment service provider confirming receipt or transfer of funds evidences the relevant payment transaction; it cannot automatically be treated as the seller’s receipt for the goods. At the same time, the mere presence of a COD parcel does not prove that the seller must fiscally register a sales transaction a second time if it has already been properly documented.

Article 2 of the Law of Ukraine dated 6 July 1995, No. 265/95-VR, defines a settlement transaction, and paragraphs 1–2 of Article 3 establish obligations to conduct such transactions and issue a document. For transactions subject to this requirement, use a cash register (RRO) or a software cash register (PRRO), subject to the statutory exceptions. Legal basis: Articles 2, 3, and 9 of Law No. 265/95-VR.

Before launching COD, give your accountant the contracts with the carrier and payment service provider, examples of customer documents, and a diagram of how funds move. Determine who accepts payment for the goods and in what contractual role, who records the sale, whether the intermediary only transfers the funds, and who provides the customer with the required document. Based on this, document the procedure for recording payment, advances, and refunds for the specific setup.

Credit to an account with an International Bank Account Number (IBAN) is not, by itself, enough to establish that any COD payment is exempt from the RRO or PRRO requirement: the entire payment method and the parties’ roles matter. Also, do not apply paragraph 14 of Article 9—concerning payment for services exclusively through remote banking systems or money transfer services—to the sale of goods. After agreeing on the process, reconcile delivery of the goods, the relevant documents, the transfer, and any refund by order number.

Accounting for Goods and COD Orders in Torgsoft

Before confirming an order, a manager can check quantity, size, selling price, and cost in «Склад → Стан складу» (“Warehouse → Stock Status”). The stock record shows the balance after receipts, sales, returns, and internal transfers. In practice, this lets the manager verify availability before promising dispatch and, after physically checking returned goods, confirm that the recorded stock movement and balance are correct.

The paid add-on «Синхронізація з Інтернет-магазином» (“Synchronization with the Online Store”) supports exporting product and stock data and importing orders; Torgsoft should remain the main accounting system, and a website developer’s assistance is required for setup on the site. Configure accounting centers, the price source, and stock reservation, then test an order. Automatic exchange runs when the program is open on the designated computer under the specified user; set the interval no more frequently than once every 10 minutes, taking other synchronized objects into account. The sequence of settings is provided in the instructions for setting up data exchange with an online store.

In «Аналіз активності покупців» (“Customer Activity Analysis”), you can select a period and accounting center, then view the number of purchases, sales amount, and date of the last purchase. The “Sales Revenue” and “Revenue in Percent” metrics in this form do not account for returns, so to assess COD, compare them with the shipment and returns register. The contact creation feature lets you record the conversation and set a reminder for a program user; you can use it to schedule an agreed follow-up with a customer.