Cash on delivery or cash on delivery: advantages and disadvantages

Cash on delivery, or cash on delivery, is a payment method where a consumer pays for a product or service after receiving it. This method is quite common in online business and has its advantages and disadvantages that both entrepreneurs and consumers should consider. 

What is cash on delivery?

Cash on delivery works as follows: to send goods via cash on delivery by Ukrposhta or Nova Poshta, the seller needs to create a delivery note. In it, they specify the necessary contact information: the recipient's name, receiving address, etc. It is important to indicate the value of the goods to get the exact amount back. 

The consumer receives the parcel from the seller at the postal operator's office or at a post office and undertakes to pay for it. However, only if the consumer is completely satisfied with the goods and agrees to purchase them. If the buyer refuses the order, the sender pays for the round-trip shipping.

After paying for the order, the post office employee records that the invoice has been paid and sends the money to the sender. 

How to get money for cash on delivery

The seller can receive funds for the cash on delivery by issuing an invoice, which he sends with the goods. 

The carrier can send money for the paid goods in cash or to the sender's account or bank card. To do this, before sending the parcel, the seller needs to indicate the return delivery of funds to the required post office in the invoice. Cash is usually received within a day. 

To receive money for the goods on the account, the sender needs to sign an agreement with the postal service. In the invoice, the seller must indicate their payment details to receive funds. 

It should be borne in mind that postal operators have their own limits on the amount of money transferred by cash on delivery. For example, Nova Poshta accepts no more than UAH 29,999 in cash on delivery at a time — this is the limit for non-cash money transfers. 

Cost of cash on delivery

The cost of cash on delivery for the sender may vary and depends on the terms of the postal operator's contract with the individual entrepreneur and the specifics of the business. The cost of cash on delivery includes a service fee and a standard delivery fee. 

The service fee consists of a percentage of the order value and a fixed amount. For example, it can be 2% + 17 UAH. For example, the cash on delivery payment indicates the cost of sneakers is UAH 2000. Therefore, the buyer has to pay an additional UAH 57, not including delivery costs. 

Let's compare the cost of cash on delivery from different carriers in Ukraine: 

• Ukrposhta: 2% + 10 UAH for sending funds in cash and 1% + 10 UAH for crediting a transfer to a card.

• Nova Poshta — 2% + 20 UAH.

• Meest — 2% + 20 UAH. 

How to make cash on delivery payments through cash registers

When accepting money from individuals by cash on delivery, sellers need to take into account the requirements of Ukrainian law. 

According to the Law of Ukraine No. 3219-IX, entrepreneurs of groups 2-4 on the single tax system must use payment transaction registers (ECR) or cash registers to transmit information to the State Tax Service about transactions for further fiscal control. This rule also applies to accepting funds for goods or services by cash on delivery. 

Although sole proprietors are not required by law to install a cash register to receive money by cash on delivery to a current account, they must actually issue fiscal checks to the buyer in any form before receiving the goods. And this can be done through a software ECR and by sending an electronic receipt to the buyer by mail or messengers. 

You should also take into account the unchanged position of the tax service regarding the use of cash registers, which Torgsoft has repeatedly emphasized: 

For more information on how and under what conditions sole proprietors should issue cash on delivery checks via Nova Poshta, read the article: Rules for individual entrepreneurs when sending goods via Nova Poshta.

Advantages and disadvantages of cash on delivery

An undoubted advantage of cash on delivery for consumers is the ability to receive goods or services immediately before paying for them. Cash on delivery or cash on delivery allows the consumer to make sure that the ordered goods are of a high quality and meet their expectations. 

This is a convenient and necessary service for purchasing "complex" goods: electronics, appliances, where you need to check the health of the device. 

Cash on delivery saves the buyer from going through a lengthy procedure for returning goods in case of refusal to purchase them. 

The service also helps consumers make a quicker decision to buy from a little-known seller, because they will pay for the goods upon receipt, without risking anything. 

For merchants, the main advantage of cash on delivery is that it can indirectly attract new customers and increase sales, as it is more convenient for many consumers than partial or full payment. 

Among the disadvantages for buyers is the high cost of the service, which, together with the amount of delivery, can put off the customer. 

For the seller, the biggest risk of cash on delivery orders is non-payment of the parcel by the consumer, who may not pick it up or order it specifically for dishonest intentions. For example, to cause material damage to the store, since the seller pays for the round-trip shipping. 

Frequent refusals of orders can negatively affect the store's cooperation with the supplier, as failure to receive funds for the goods can lead to a delay in the circulation of money.

Cash on delivery is one of the most convenient payment methods for both consumers and entrepreneurs. It works for the future and helps to increase customer loyalty and sales. However, it requires careful risk analysis and appropriate measures to maintain financial order in the store.