The working-capital cost of COD

When a prepaid order is delivered, the money is already yours. When a COD order is delivered, the cash is in a delivery executive's bag. It then moves through the courier's collection, deposit and batch-remittance process before it reaches your account. Courier partners typically take 7 to 14 days to remit COD collections after delivery. In the UAE, Shorages measured the same lag at about two weeks.

That lag is a cost, and unlike RTO it applies to your successful orders, which means it applies to most of your COD revenue.

Work through a simple example. A brand ships 1,000 COD orders a month at ₹850 average order value. About 75% deliver successfully, so COD collections run at roughly ₹6.4 lakh a month. With a 10-day average remittance lag, the brand permanently has about ₹2.1 lakh of its own revenue sitting in couriers' hands (₹6.4 lakh × 10/30).

That capital has a price. If the brand's working capital costs 12 to 15% a year (a working-capital loan, or the return the same cash would earn buying inventory that turns), a permanent ₹2.1 lakh float costs roughly ₹25,000 to ₹32,000 a year. For a larger brand the number scales linearly: at 10,000 COD orders a month, the float is over ₹20 lakh and the annual financing cost crosses ₹2.5 lakh.

The float is not static; it grows exactly when you can least fund it. Scale order volume for a sale season and the remittance float scales with it, precisely when inventory and ad spend are also pulling on cash. Brands feel this as a mysterious tightness in good months: revenue is up, and the bank account is not.

There is also a risk layer. Cash in a courier's process is cash exposed to reconciliation errors, disputed deductions and, in the worst case, a partner's financial trouble. It is an unsecured, unrecorded loan you make to your logistics chain every day.

Measure the lag per courier. Delivery date to remittance date, per courier partner, monthly. Lags vary, and the worst offenders are negotiable or replaceable.

Reconcile every remittance. Batch remittances arrive net of deductions. Matching them order by order is how you find shortfalls; that deserves its own post in this series.

Price COD with the lag included. When you compare payment modes, prepaid is not just safer; it is faster cash. A payment gateway fee of about 2% is often cheaper than a 10-day float plus COD handling fees, before you count RTO at all.

Shorten the cycle where you can. Some aggregators offer faster COD remittance as a paid feature. At scale, buying down the lag from 10 days to 3 can be one of the cheapest working-capital decisions available.