Notice of COD Terms Template

In plain language: Opens the letter by identifying your company and the customer, including full mailing addresses and the date of the notice.

Common mistake: Addressing the letter to a general inbox or department rather than a named accounts-payable contact. A misdirected notice may never reach the person with authority to act on it.

In plain language: A brief, unambiguous heading that tells the reader exactly what the letter is about before they read a single sentence.

Common mistake: Using a vague subject line like 'Account Update.' A specific subject line ensures the letter is routed to the right person and is harder to overlook or dismiss.

In plain language: States clearly and professionally that the customer's account is being moved to COD terms, and gives the specific effective date.

Common mistake: Burying the COD requirement in the middle of a paragraph. The requirement must be stated in the first or second sentence so there is no confusion about the letter's purpose.

In plain language: Provides a concise, professional explanation for the change — typically referencing the outstanding balance or account status — without unnecessary detail or accusatory language.

Common mistake: Including an overly detailed recitation of every missed payment. A single factual statement of the outstanding balance is sufficient and reduces the risk of a dispute over specifics.

In plain language: Lists exactly which forms of payment will be accepted at the time of delivery, removing any ambiguity for the customer's procurement team.

Common mistake: Omitting this clause entirely and assuming the customer knows what COD means in your context. Different suppliers define acceptable COD payment methods differently — spelling it out prevents delivery disputes.

In plain language: Explains how the customer should proceed when placing their next order under the new terms, including any advance notice required for payment confirmation.

Common mistake: Failing to provide a clear process for the next order. Without this, customers may simply stop ordering rather than adapt, resulting in lost revenue.

In plain language: References any existing unpaid balance and requests payment by a specific date, separate from the COD requirement going forward.

Common mistake: Conflating the outstanding balance with the new COD requirement. These are two separate issues — mixing them creates confusion about whether COD is a penalty for the overdue balance or a permanent policy change.

In plain language: Invites the customer to contact you to discuss their account, signals that the relationship remains important, and provides direct contact information.

Common mistake: Omitting this clause and ending the letter on a purely transactional note. A professional closing reduces the risk of the customer escalating the dispute or taking their business elsewhere without a conversation.

In plain language: Closes the letter with a standard business sign-off, printed name, title, and company name.

Common mistake: Signing from a generic department name rather than a named individual with a title. A named signatory gives the letter authority and provides the customer with a real point of contact.

A Notice of COD Terms is a formal business letter a supplier sends to a customer to inform them that future orders must be paid cash on delivery rather than on previously extended credit. It states the effective date, explains the reason briefly, lists accepted payment methods, and requests settlement of any existing overdue balance. It creates a written record of the policy change and gives the customer clear instructions for continuing to do business under the new terms.

Send it when a customer has accumulated overdue invoices, exceeded their credit limit, or when your credit review process flags a material deterioration in their payment behavior or financial position. It is also appropriate for new accounts that do not yet qualify for trade credit, or as a precautionary step before escalating to a formal collections process. Sending it proactively — before the situation worsens — gives you a documented paper trail and preserves the business relationship.

No. A Notice of COD Terms is a unilateral supplier communication, not a contract requiring counter-signature. It informs the customer of a change in your payment policy. The customer's continued placement of orders after the effective date constitutes acceptance of the new terms in most commercial contexts. That said, it is best practice for the notice to be signed by a named individual on the supplier side to give it authority.

Common COD payment methods include certified check, cashier's check, money order, bank wire transfer confirmed before dispatch, and online payment platform links (Stripe, PayPal, or similar). Clearly exclude any forms you will not accept — most suppliers exclude personal and business checks under COD terms because they carry non-payment risk. Specifying payment methods upfront prevents delivery disputes and delays.

Yes. Email delivery is generally acceptable for business notices and creates a time-stamped delivery record. For customers with significant outstanding balances or where the relationship is contentious, consider sending both an email and a physical letter via certified mail to establish proof of delivery. Always CC your account manager and retain a copy in the customer's file.

Not necessarily. A professionally written notice that explains the reason factually, offers a clear path for continued ordering, and invites the customer to discuss their account minimizes relationship damage. Many customers accept COD terms as a reasonable response to late payments. The letter's tone matters: matter-of-fact and solution-oriented language is far less likely to provoke a negative reaction than punitive or accusatory phrasing.

COD requires payment at the moment of delivery, before the goods change hands. Payment in advance (PIA) requires the buyer to pay before the goods are even dispatched. COD is less restrictive than PIA because the customer can at least inspect the delivery before paying, but it still eliminates the supplier's credit exposure on new orders. PIA is typically reserved for customers with a history of refusing deliveries or disputing invoices after receipt.

Five to ten business days is standard for most B2B supply relationships. This gives the customer enough time to adjust their procurement process, arrange certified funds, and notify their accounts-payable team. Shorter notice periods — fewer than three business days — can be seen as punitive and may trigger a dispute or order cancellation. If the customer has a standing delivery schedule, align the effective date with their next order cycle where possible.