Understanding 5 Different Payment Methods, Including COD

Owning or buying a business that requires service, delivery or distribution requires a guaranteed payment, you need this payment to be made on the spot to ensure you have the capital to handle your business expense, so that is why a COD payment is applied unless you have a long term customer and set up a different payment method…

So, what is a COD Payment, and how to sell a business that only accepts cash? Well, there are several different types of payments that route businesses can use to complete transactions. As the title of this article is labeled what is a cod payment? Let’s begin with that it is one of the most popular options for service-based businesses because you provided a job that required labor and time, so collecting cash when the service is complete becomes awarding and has a good feel to it… This article will discuss what a cod payment is how it works and what spells out C.O.D. Additionally, we'll provide some tips on how to use a cod payment safely and effectively in your business and when you should use and not use a cod payment.

What exactly is a cod payment?

The acronym C.O.D. stands for "Cash on Delivery," and it is correctly spelled as "C-O-D." This payment method is widely used in various business sectors. C.O.D. essentially means that customers pay for goods or services at the moment they receive them, typically during the delivery process.

Cash on Delivery is a straightforward and convenient way of conducting transactions, particularly in situations where immediate payment is essential. It gives customers the advantage of inspecting the products or services before making the payment, ensuring their satisfaction with the purchase. This method is often employed to promote and reward customer loyalty, as it offers trust and transparency between the buyer and the seller.

What are some Other Types of Different payment types? 

In today’s day and age, we have the technology to thank! You can simply collect any type of money over the phone, no cash no problem, you take out your phone add a swiper that’s connected to your business bank account, and make a payment, but what if it’s a long-term customer and wants something different? Let us explore these other payment options you might get asked about or might want to use.

1.  15-day net: A 15-day is offering a client an invoice and they don’t have to pay it for 15 days, you drop the order and they have to pay that bill and then make the next order. 

2. 30-day net: Similar to a 15 but these extended out longer, it is 30 days you will wait to get paid…and it is very common with distribution, especially when it is a new account and they just opened up most likely that will ask for a 30 or even a 60-day net, in this case, you will be giving them time to pay the bill till business takes off.

3. Bill 2 Bill: This payment method is used with mostly distribution services, if you have a customer that is ordering every week you can offer the customer a bill-to-bill deal, for the first order they don’t pay it, but the order they make the following week they will pay the weeks before invoice and this goes on throughout the lifeline of the customer.

4. Pay over the phone: This payment method can work with certain types of businesses, let’s use an example, you own a home heating oil business and you are out early in the morning delivering oil to buildings and homes, you want to be out early so you can avoid traffic but you can’t collect from anyone because its mostly landlords, so you take all payments over the phone after delivery is made.

What businesses use COD?

C.O.D is known as cash on delivery, this means no money no service! It is the most common one used in business nowadays, and this option can be used in all types of businesses, here are 3 examples that may require C.O.D.…

Distribution/Beverage distribution: You get a random call on your business number, it is a new customer looking to buy wholesale beverages from your business, they probably got your number from a friend or neighbor, they give you the order and you deliver it, in this scenario you will collect C.O.D.

Service-based business/sewer jetting service: This requires hard labor, and might take you anywhere from 2 hours to 4 hours depending on how bad the clog is, in this service you let it know its payment after work is complete.

Delivery business/ box truck business: You have a box truck, you are offering amazing gigs, like waste removal or even moving furniture and after you finish your task you will like to be paid, this is also considered C.O.D

Here are some more examples: 

Online Retailers: Many e-commerce businesses, particularly in regions with a preference for cash payments, offer C.O.D. as a payment option for customers who want to pay for their online orders upon delivery.

Local Grocery Stores: Some local and smaller grocery stores offer C.O.D. for home deliveries of groceries, allowing customers to pay for their orders in cash upon receipt.

Flower Shops: Florists may use C.O.D. for flower deliveries, especially for special occasions or last-minute orders.

Local Food Delivery: Smaller, local food delivery services sometimes accept C.O.D. payments for restaurant deliveries.

Couriers and Package Delivery Services: Package delivery companies may allow C.O.D. for shipping items when the sender requires the recipient to pay for the package upon delivery.

Direct Sales and Door-to-Door Sales: Businesses that conduct direct sales, like cosmetics or household products, often use C.O.D. as a payment method when their sales representatives visit customers at their homes.

Fish and Seafood Suppliers: Businesses that supply fresh seafood to restaurants and individuals may offer C.O.D. for their deliveries.

Local Crafts and Artisans: Local artisans selling their crafts and artworks at markets or events might use C.O.D. to allow customers to pay in cash upon purchase.

Small Appliance Repair Services: Some small appliance repair businesses offer C.O.D. payment options for in-home or on-site repair services.

Please note that the prevalence of C.O.D. may vary by region and the specific payment practices of individual businesses. While C.O.D. is not as common in some parts of the world due to the popularity of digital payment methods, it is still a viable option for certain businesses, especially in areas where cash transactions are preferred.

How to sell a cash-only business? 

So we got down what is a cod payment but now Selling a business with well-organized financial statements and a strong online payment system is a challenging task. However, when it comes to selling a cash-only business, the complexity can increase. The positive aspect is that the IRS acknowledges cash payments. Still, to ensure a smooth sale and prevent potential audit concerns for potential buyers, it's crucial to maintain a meticulous transaction log. Here are some essential tips to successfully sell a cash-only business:

Accounting Software: Use accounting software like QuickBooks, FreshBooks, or Xero to manage your business's finances. These platforms allow you to enter income and expenses manually, helping you keep accurate records. You can also generate reports and track financial performance over time.

Daily Sales Records: Record daily sales transactions accurately. This should include details such as the date, item sold, quantity, and sales amount. Use a receipt book or digital sales system to issue receipts to customers.

Expense Tracking: Maintain a clear record of all business expenses, including rent, utilities, supplies, and other operational costs. Use accounting software to categorize and track these expenses.

Separate Business and Personal Finances: Open a dedicated business bank account to keep your business finances separate from personal finances. This simplifies record-keeping and helps with tax compliance.

Regular Bank Deposits: Make regular deposits of your daily cash earnings into your business bank account. This practice ensures the safety of your cash and simplifies cash flow management.

Daily Reconciliation: At the end of each business day, reconcile your cash register or daily sales records with your cash deposits. Ensure that the amount matches what you expected based on your sales records.

Document All Transactions: Keep a comprehensive record of all transactions, including purchases, sales, and any cash withdrawals from your business account. Maintain both digital and physical copies of important documents.

Use Accounting Codes: Assign specific accounting codes or categories to each type of transaction in your accounting software. This helps with accurate financial reporting and tax preparation.

Regular Financial Reports: Generate regular financial reports from your accounting software, including profit and loss statements and balance sheets. These reports provide insights into your business's financial health.

Backup Documentation: Safeguard backup documentation, such as invoices, receipts, and bills. This documentation is essential for verifying your financial records and addressing any discrepancies.

Regular Audits: Periodically conduct internal audits to verify the accuracy of your financial records. This practice helps detect errors or discrepancies and allows you to rectify them promptly.

Seek Professional Guidance: Consult with a certified public accountant (CPA) or financial advisor to ensure that your financial practices align with best practices and tax regulations. They can offer valuable advice on managing your cash-only business.

By following these steps and using accounting software to maintain organized financial records, you can effectively manage a cash-only business while ensuring financial transparency, accuracy, and compliance with accounting and tax requirements.

In conclusion, we covered What is C.O.D. payment? We covered how to sell a cash-only business - it's crucial to thoroughly understand various payment methods and their implications for your business. Proficiency in handling C.O.D. payments is a valuable skill that can contribute to the smooth operation of your business. It's important to note that although C.O.D. stands for "Cash on Delivery," it can encompass various forms of payment, including cash, credit card, or even checks, depending on your business's policies. When you're considering buying a business, it's essential to familiarize yourself with the payment methods it accepts and ensure the accuracy of the financial data provided. On the other hand, if you're operating a cash-only business, it's prudent to structure it in a way that not only ensures day-to-day functionality but also makes it an attractive proposition for potential buyers in the future, preventing them from walking away due to payment constraints. Understanding the nuances of payment methods and their impact on your business is a key element of successful entrepreneurship.

Disclaimer: The information provided in this article is for general informational purposes only and should not be considered legal advice. The laws and regulations regarding business licenses may vary from state to state and are subject to change. It is important to contact your local state office to determine which licenses are required for any specific businesses. Additionally, please note that this article contains affiliate links and we may earn a commission from our affiliate partners or Amazon links. If you are considering starting a business, it is recommended that you seek the advice of a qualified lawyer, business broker, or professional in your area. The information provided in this article is not a substitute for professional advice and should not be relied upon as such.