Companies that ship goods to customers have several things to consider, from what carrier and transportation mode to use to the best packaging for the item being shipped. Even more important: Companies need to weigh the best method for receiving payments.
Traditionally, open account and credit card sales have been popular options for payments. Unfortunately, with an increased number of customers unable to make payments, and increased debt write-offs, the recent recession has caused many shippers to think twice about offering only these choices.
And while consumers still depend on plastic as a payment option, a 2011 report by Index Credit Cards, which tracks changes in the credit card industry, notes two trends that are dampening the volume of credit card usage: a broad movement toward debt reduction, and greater use of alternative payment methods. According to a recent study by Hoffman, Brinker & Roberts, a debt-settlement company, more than one-third of consumers surveyed reported having paid off and closed a credit card since January 2008; nearly half said they have reduced their use of credit cards for purchases.
As more and more companies rethink their reliance on credit card payments, collect on delivery (C.O.D.) service has made a comeback.
Like the white dress shirt or the little black dress, C.O.D. is a classic that can be just as useful today as it was when first introduced. Before the package delivery company’s driver completes the delivery of a shipment, the recipient hands a check or money order to the driver.
How does C.O.D. stack up against open account, credit card and PayPalTM transactions? Here's a close look:
While processing times for C.O.D. payments may be longer, in some cases, than those of credit card and PayPal transactions, they are far shorter than the time it takes to receive payments from most traditional invoices sent to companies you sell to.
It's worth noting that UPS and its financial services arm, UPS Capital®, are doing innovative things to speed up the processing of C.O.D. payments even more.
While C.O.D. shipments normally carry a service fee per shipment, C.O.D. fees, when compared to the service fees incurred via credit card or PayPal transactions, actually may be less – saving you money. This is why businesses are taking a serious second look at C.O.D. as a viable form of accelerating cash flow without incurring the processing fees associated with electronic or credit card payments.
Of course, C.O.D. is not a one-size-fits-all solution. Invoices can be useful for shipments to routine customers who purchase large volumes of goods and have good payment histories. But for companies that need payments quickly to maintain working capital and that want to avoid the service charge of a credit, C.O.D. is an option to consider adding to your mix.
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