Companies shipping goods to customers have several things to consider, from what carrier and transportation mode to utilize, to the packaging for the shipments. In addition to these essential details, companies need to consider something even more important – the best method for receiving payments.

    Open account and credit card sales are popular options for payments to suppliers. However, due to increased cases of customers who are unable to make payments, and increased debt write-offs, the recent recession has caused many shippers to think twice about selling on open account terms and accepting credit card payments. 

    A 2011 report by Index Credit Cards states that “while credit cards remain a popular payment option for consumers, two consumer trends are working to dampen credit card volume: a broad movement toward debt reduction, and greater use of alternative payment methods.” In fact, according to a recent study by Hoffman, Brinker & Roberts, 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 hesitate to rely on credit card payments, the classic option of using Collect on Delivery (C.O.D.) services to collect payments remains a viable one. 

    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. When a package delivery company’s driver completes the delivery of a shipment, the recipient hands a check or other negotiable instrument to the driver. Usually it is a company, bank, personal and/or cashier’s check made payable to the supplier for the appropriate charges negotiated between the buyer and supplier. It can also take the form of a money order. 

    Certain carriers understand the importance of cash flow to small businesses and have provided a variety of enhanced services for C.O.D. shipments. These services can expedite, advance and secure funds, as well as offer shippers the ability to select the number of days before C.O.D. remittances are automatically deposited into their bank accounts. Bottom line: Checks that once took up to two weeks to receive via mail can be deposited into a shipper’s bank account in as little as two days. This acceleration of funds can also help businesses more quickly assess the risk of buyers with insufficient funds. 

    How does C.O.D. stack up against open account, credit card and PayPalTM transactions? Here’s a closer look:

    Timing – Processing times can vary by the type of C.O.D. service you choose. A standard C.O.D. payment can take up to 16 days after the delivery of the package for the check to clear the banks, and to make the funds available to the seller of the goods. However, there are also enhanced C.O.D. options that are designed to accelerate the flow of the funds. Depending on the level of C.O.D. service chosen, funds can be available to the seller in as little as two to six days after the delivery of the package. Other enhancements include protection against checks that “bounce” and are returned because of insufficient funds.

    While processing times for C.O.D. payments are longer than those of credit card and PayPal transactions, they are far shorter than the time it takes to receive payments from most traditional invoices.

    It’s worth noting that UPS and its financial services arm, UPS Capital, are doing some innovative things to speed up the processing of C.O.D. payments. 

    Cost – C.O.D. shipments normally carry a service fee per shipment, and depending upon the selected C.O.D. service level, such as providing protection against non- sufficient fund (NSF) checks, the charges may be a little more. But, it is also true that using the C.O.D. service -- when compared to the service fees incurred via credit card or PayPal transactions -- may be less. 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. 

    To be clear, however, C.O.D. is not a one-size-fits-all solution. The quicker turnaround of a credit card payment is sometimes necessary, and invoices can be useful for shipments to routine customers who purchase large volumes of goods and have good payment histories.

    However, for companies that need payments relatively quickly to maintain working capital and cannot afford to sacrifice revenue for the service charge of a credit charge or PayPal transaction, C.O.D. is something to consider. 

    In the end, like many other areas of the world of business, a mix of options is usually the best solution, rather than relying on any single option.

    Mike Bryant is the North America Product Director for UPS Capital, the financial services arm of UPS. For more information about UPS Capital, please visit or call 1-877-263-8772, or click here to contact Mike Bryant via LinkedIn.