While Prepaid & Add is one of the most common shipping payment methods for LTL shipping, an alternative of shipping collect could be the better option for your business. Using prepaid & add, the seller pays for the shipping and chooses the carrier and shipping terms. However, using Shipping Collect, the buyer or receiver of the shipment can choose the carrier and negotiate payment terms on their own. This can offer a variety of unique benefits over other payment options. Companies partnering with a 3PL would utilize what is known as third-party collect.
Shipping Collect vs. COD
A common misunderstanding is a distinction between shipping collect and COD or “Cash on Delivery.” While the idea behind these two payment methods is similar, the two are very different. In shipping collect, the receiver or consignee of the shipment is billed by the carrier for the cost of the shipment. This eliminates any handling charges, which means you’ll save money.
COD is a payment method by which the consignee or receiver of the shipment pays the driver or deliverer of the shipment. In a shipping collect situation, the receiver would simply pay the carrier.
Benefits of Shipping Collect (or 3rd Party Collect)
Shipping collect is a popular shipment method for businesses of all sizes looking to save on the cost of shipping on purchases that arrive at their office daily. There are several unique benefits to utilizing this payment method.
Save on shipping costs. Because shipping collect allows you to choose your own carrier, it also means you can utilize the negotiated rate you’ve already arranged with your carrier. This gives you the opportunity to take advantage of any bulk shipping rate you’ve already arranged.Control the shipment route. By taking control of the carrier and payment terms, you also have the opportunity to take control of the shipment route for your packages. You can choose how many and how often trucks deliver to your door.Control delivery flow. Getting control of the delivery frequency also means you can create a receiving process that maximizes the effort of your staff. Whether you only receive packages in the morning, or you receive them right after a shift change, you control the flow of delivery.Maintain tracking. By choosing the carrier of your choice, you also have the added benefit of being able to utilize the tracking process you already have in place. This can help you keep organized and in the know on important shipments to or from your place of business.Choose your carrier. And of course, the biggest benefit of shipping collect is that you can choose the carrier you like the best. Whether it’s one you have a negotiated discount with or one you know will always get your shipments there on time and undamaged, the choice is yours.
Learn More About LTL Shipping
To learn more about the many shipment options available to you, contact a full-service third-party shipping and logistics company. Amware offers a variety of shipping services and methods to make your logistics process as seamless as possible. Contact us now to learn more about 3rd party collect, or request a free 30-day trial of our proprietary LTL software, Amrate, below.
FAQs
Cash on delivery is a term, and acronym, used to signify that a driver will collect payment for a shipment — usually a previously-specified amount — when it delivers. COD is used when a shipping contract denotes “freight collect” but is becoming less common due to the risks associated with this process.
Is COD the same as collect? ›
Cash on delivery, or collect on delivery (COD), is a method of collecting payment that requires customers to pay for goods at the time of delivery.
What is the difference between shipping and COD? ›
Customers who select COD as their payment method do not have to pay any additional shipping charges. The company absorbs the shipping cost as part of its service or promotional offer. Direct Shipping: "Direct shipping" for COD orders refers to a scenario where the shipping cost is directly borne by the customer.
What is the collect method of shipping? ›
In a 'freight collect' payment, freight charges are billed to the party receiving a shipment, often called the consignee, rather than the party sending it over. Basically, the person that 'collects' the shipment at the end has to pay for the cost of its transit.
What is the difference between prepaid and collect shipping? ›
Shipments that are sent collect require the receiving party to pay all shipping charges. Shipments that are sent prepaid require the party shipping the freight to pay all shipping charges.
What is the difference between freight payable and freight collect? ›
Under FOB, 'freight collect' means the buyer is responsible for freight charges after goods have been loaded onto the vessel, while 'freight prepaid' means that the seller bears the cost of shipping till that point.
What are the disadvantages of cash on delivery? ›
Disadvantages. The cons of COD for businesses are that there is a greater risk that goods will be refused on delivery, and there are costs involved in returning items. For buyers, it may be more difficult to return items if they have already paid for them at delivery.
What is COD collection fee? ›
Carriers typically charge COD fees of between one to two percent of the amount collected, plus modest markups on the currency exchange rate.
What is the difference between 3rd party and collect shipping? ›
COMMON TYPES OF FREIGHT CHARGES
Third party: The 3PL provider, or another party, pays for all freight charges, instead of the shipper or consignee. Cash on delivery: A COD payment means the carrier collects payment from the consignee at the time of delivery.
Is COD still a thing? ›
In some countries COD remains a popular option with internet-based retailers, since it is far easier to set up for small businesses and does not require the purchaser to have a credit card. Many small businesses prefer cash payment to credit card payment, as it avoids credit card processing fees.
COD – Collect on Delivery / Cash on Delivery:
A process where the carrier collects payment for the shipment from the consignee, before releasing the freight. An alternative to COD is pre-paid shipping, where the freight has already been paid for ahead of pick up.
Does USPS do COD shipping? ›
Any mailer may use collect on delivery (COD) service to mail an article for which the mailer has not been paid and have its price and the cost of the postage collected from the recipient. If the recipient pays the amount due by check payable to the mailer, the USPS forwards the check to the mailer.
Who is responsible for collect shipments? ›
Freight collect terms puts the onus on the buyer (often referred to as the consignee) to pay for the freight charges directly. The costs are paid (or collected) from the buyer at the time of delivery. With freight collect shipping, the buyer agrees to take on full responsibility and cost of shipping.
What are the three types of shipping? ›
All three modes of shipping-land, air, and sea-play a significant role in our economy.
What is the difference between FOB and collect? ›
“FOB Origin” refers to the legal fact that the buyer assumes title of the goods the moment the freight carrier picks up and signs the bill of lading (BOL) at the origin pick-up location. “Freight Collect” refers to the legal fact that the buyer is responsible for all freight charges.
What does COD mean in collections? ›
Court-ordered debt collections COD.
What does COD mean on a ship? ›
Cash on delivery (COD) is a type of transaction where the recipient pays for a good at the time of delivery rather than using credit.
What is customer collect shipping terms? ›
Collect: Customer uses a carrier that they directly contract and the carrier bills the customer for freight charges. The seller is responsible for alerting the customer when the order is ready to be picked up, and it is the responsibility of the customer to arrange with the carrier the pick-up time and transit time.
