01 Jun What Is Collect on Delivery (C.O.D.)?
Why Would a Company Use Collect On Delivery (C.O.D.) Charges?
Collect On Delivery or C.O.D. minimizes risk for the shipper when it comes to collecting payment for goods. Payments are collected by the truck driver. Packages are delivered only when payment has been collected.
Company A would like to collect payments for their goods but minimize the processing cost of physical checks and monthly bank fees. They can sign up for a C.O.D. contract with FedEx or UPS that would allow the carriers to collect payments on their behalf. Once payment is received, direct payments are given to Company A 2-3 days from the delivery date. The $12.50 charge seems reasonable. However, if you are sending out 30 packages a day at $12.50, that is $375.00 a day! The ideal time to use this service is if you are sending a few packages a day.
FedEx and UPS carry a lot of risk while attempting to deliver and collect payments on your behalf. If the package is lost or stolen, the carrier is liable for all costs. What if a check that is collected bounces due to insufficient funds? FedEx and UPS will have to spend time and resources to re-collect the monies owed from the customer.
All packages delivered are guaranteed by a certain time. This puts a lot of pressure on truck drivers to finish their daily routes in a timely manner. Failure to deliver packages on time means that shippers can file for service refunds for 100% of the cost of the shipment. The bottom line here is that drivers do not like to deliver C.O.D. packages. Drivers have to spend time waiting for packages to be opened and checks to be written.
UPS will attempt to collect the amount shown on a C.O.D. tag or package label, then send payment to you. If payment cannot be collected after three attempts, the package will be returned. C.O.D. service is available for packages shipped throughout the U.S. and Puerto Rico. Business or personal checks are accepted as payment. Currency is not accepted for payment. C.O.D. is not available when using 3 Day Select® or UPS Ground® shipping documents.
FedEx C.O.D. allows the shipper to designate the amount of money that the FedEx Ground driver collects from the recipient when a package is delivered. If the FedEx Ground driver collects guaranteed funds, or a company and/or personal check, the payment is sent directly to the shipper via U.S. mail. If cash is collected, by the next business day, FedEx Ground issues a check to the shipper in the amount of the cash collected. The FedEx issued check is sent to the shipper using the U.S. Postal Service. The shipper must designate the type of payment to be collected by FedEx Ground. FedEx Ground C.O.D. is not available with the FedEx Home Delivery<sup>®</sup> service.