Online shopping in the Philippines has remained strong since the pandemic started; it just grows and grows as time passes. 9 out of 10 Filipinos are now more engaged in online shopping than in 2023 and the years before.
In purchasing goods, payment options are vital to get your goods to your doorstep. Despite all the digital alternatives when paying for your goods, cash is still number one for many Filipinos.
If you are a budding entrepreneur starting your way in the business world, you need to know how to implement cash on delivery to your business, and this article will help you.
What Is Cash on Delivery (COD): Definition and Purpose
Cash on delivery is a payment method where the customers pay for the delivered goods they ordered at their doorstep. Unlike online payment processing, the courier or the delivery person will tell you the amount of your order, and you need to pay it in full.
Under any circumstances, if there is a delivery refusal or the customer who ordered is nowhere to be found, the item will be shipped back to the retailer/seller with no payment.
E-commerce stores offer cash payment as a payment option. Although it is a risk to your business in some way, most Filipinos prefer COD transactions for some reasons, like safety from online scammers and the goods being safely delivered to their houses.
With the COD option being the number one payment option in the Philippines, many businesses use the accrual accounting method, where the company immediately records the revenue before receiving the payment for the goods that a customer avails.
Companies who use the accrual method record payments in accounts receivable. Accounts receivable means the money your customers owe for goods or services they have received but not yet paid for.
Consider accrual or cash accounting if you have payment options, including COD. With cash accounting, you will be able to record the transaction as revenue after you have received the payment for the product or service.
Determining if Cash on Delivery is Right for Your Business
Online stores in the Philippines mostly have a cash-on-delivery as a payment option because that’s how most customers pay. In determining the payment options for your business, you need to distinguish the pros and cons it will give your company.
On the good side, having a COD payment method in your business means you can target many online shoppers. By large numbers, it means you can also reach those customers who do not have a bank account and rely on paying with cash for convenience.
You can also build a good relationship with your customers because you ship their product well and you stay true to your commitment; even though their order may be the cheapest one in your product line, you still need to be consistent and never ignore a single order, no matter the price.
The downside of COD is that if your products are fragile and most likely to break if your delivery couriers or logistics partners did not take care of them well, the product might break and would not be accepted by the customer. This would become an RTO or return to origin product because the customer refuses to pay.
If your business is in line with perishable goods, cash on delivery might also be a risk because, if there are delays in the delivery from your logistics partner, your product might spoil and would not be accepted.
All in all, COD will help your business reach more audiences and drive online sales; at the same time, it will create customer retention. But always include in your business plan the type of products you would ship out and allow COD with.
Setting Policies and Guidelines for Cash on Delivery Orders
Many online stores and online marketplaces have cash on delivery as a payment option, that’s for sure. To ensure safe transactions between both customer/consumer and your business, you need to set some policies and guidelines for the COD option.
Let’s review those below:
- Verify the customer’s information: make sure the customer is legitimate, confirm the contact information, and ensure the address provided is accurate.
- Set a COD purchase value: This guideline means that your customer can only order products that fall in the price range viable for COD. This tactic can mitigate risk and high-profit loss in case unwanted errors happen.
- Be accurate with the delivery date: Customer retention happens if you provide top quality and true-to-word services; that is why you need to partner with a delivery services provider / logistic partner/courier that does delivery work seamlessly and truthfully. Buyers pay enthusiastically if their orders arrive on time and will likely be available again.
To avoid problems regarding the payment for COD goods, make sure that the delivery option of the courier can enable the delivery driver to accept payment via payment processing solution, but mostly here in the Philippines, they allow Gcash for COD payment, they need an additional fee for the cash-out fee.
COD Order Verification and Confirmation Process
When your customer places an online order in your ecommerce store and chooses cash-on-delivery as the preferred payment method, there is a verification and confirmation process involved.
Let’s see it below:
- Invoicing: Whether automated or not, you must create an invoice and provide the customer with the exact amount they need to prepare upon the delivery date.
- Shipping fees: The customer will also need to pay shipping fees and handling charges, adding to their order amount.
- Order tracking: After that, you can provide live tracking via the platform you are using or manual tracking if you are selling on online marketplaces.
- Customer notifications: Notify the customer when the delivery work is out, and we will attempt to deliver on your customer’s doorstep.
Lastly, when the delivery is made, your customer will confirm it, and your money will be on the way.
Managing COD Payments: Cash Handling and Security Measures
When it comes to starting a business, you need to limit the cop payment option in some locations to avoid the risk of fraud. Also, you need to allow your delivery driver to directly accept other forms of payment aside from cash just in case there has been a mishandling of the situation.
If you have a brick-and-mortar business and have employees doing your deliveries, you must provide them with secure safety boxes to put the cash in so that proper cash handling can be practiced.
You should also have frequent bank deposits to avoid having too much money on site or in your business area premises.
Communicating COD Terms and Conditions to Customers
If you have a website or an online store, you must let your customers know you have a cash-on-delivery service/payment method. Also, you need to be specific on which products are viable for COD and which are not, and be clear about the limitations and policies. Regarding delivery refusal because of perishable goods or damaged items, be clear to your customers about the steps they need to take in case they need to return the goods.
Addressing Potential Risks and Fraud
In some cases, scenarios where the delivery date becomes advanced, and the customer does not have cash in hand, have the third-party courier or your employee allow the customer to pay via digital or other COD mobile payment options. Also, the delivery rider should know the procedures in case of theft and robbery.
You also need to study locations that are most likely hard to make deliveries and not allow COD payment methods in those locations to avoid risks and fraud. Always have your customers’ authentic contact details/information just in case they don’t pay.
COD and E-commerce: Integration with Online Platforms and Marketplaces
COD on e-commerce platforms is a must-have and is the most chosen payment method in the Philippines. Shipping fees and handling charges are always included in the platform because you will be partnered with the platform’s courier for more accurate and safe delivery.
In case a wrong item is delivered, or there are damages to the item after being paid, shipping return fees are free if you drop the item at the drop-off point of the couriers and have the seller help you with the procedures on the other hand, the customer would have to pay the shipping return fee to ship it back to the seller or retailer.
Some sellers accept digital payments or other modes of payment aside from cash just in case the customer does not have cash; this is called collecting payments in general.
The Bottom Line
Cash on delivery is an excellent payment method to have in your business. This could benefit both the buyer and you, the business owner, in terms of consistent cash flow, and at the same time, you are adhering to the customer’s on-demand services, which is a good thing.
Offering a cash mode of payment will never decline in the Philippines because, as the saying goes, Cash is King in the Philippines.
Frequently Asked Questions
What is the difference between cash on delivery and collect on delivery?
They’re the same thing, although collect on delivery means the delivery rider can accept payment other than cash, for example, checks and digital payment if accepted by the seller or the couriers.
Is cash on delivery safer?
As a buyer, ensuring your product is delivered in whole pieces is much safer. Having to pay after you have checked the products is much more fulfilling for many customers/consumers.
As a business owner, cash on delivery can be risky if there are any errors regarding courier/logistics partner, delivery refusal, etc. Still, if you want many customers, you must provide what they demand regarding payment options.
Do all e-commerce platforms have a cash-on-delivery payment method?
Yes, most biggest retailers or e-commerce platforms have cash on delivery as a payment method.
Ventsislav Kirilov