Why do suppliers require COD?
New accounts, small order sizes, past late payments or credit concerns. COD protects the supplier but squeezes the buyer’s cash.
Some suppliers move accounts to net-7 or net-14 terms after several months of on-time payment. Ask what it takes.
Providing trade references and bank references can speed the move to terms.
How do operators manage COD?
Order more frequently in smaller amounts, keep a delivery reserve, schedule deliveries after strong sales days, and track food cost closely.
Frequent smaller deliveries keep cash from being tied up in inventory and reduce spoilage.
Check each invoice at delivery before paying. Shorted cases, substitutions and price changes are easier to resolve at the door than after the driver has left with a check.
How do I get net terms?
Pay every COD delivery on time, ask your rep for a credit application after a few months, and provide references.
Net terms can make a big difference: paying a week later frees cash every week.
| Step | Action | Result |
|---|---|---|
| Pay on time | Every delivery | History |
| Credit application | After a few months | Review |
| References | Trade and bank | Faster approval |
| Net terms | Net-7 to net-30 | Cash freed |
Worked example: a new café on COD
A café open less than a year averaging $46,000 in monthly deposits pays COD to its main food and dairy suppliers and wants $8,000 to keep a delivery reserve while it builds history for net terms. Using an illustrative factor rate of 1.21, $8,000 would mean $9,680 repaid over roughly 4 months: 17 weekly payments of about $569.
That works out to about $2,420 a month, or 5.3% of the $46,000 this business deposits monthly, and the total cost of the money is $1,680. Once suppliers extend net terms, the reserve can be rebuilt from regular sales.
For comparison, repaying the same $9,680 over 2 months would lift the monthly outlay to about $4,840, or 10.5% of deposits, and whether the faster payoff is worth that bigger payment depends on how steady your slow months are.
| Average monthly deposits | $46,000 |
|---|---|
| Amount funded | $8,000 |
| Factor rate (illustrative) | 1.21 |
| Total repaid | $9,680 |
| Cost of the funding | $1,680 |
| Term | about 4 months |
| Weekly payment (17 payments) | $569 |
| Payments as a share of deposits | 5.3% |
Who this fits
Usually a fit
- Newer hospitality businesses on COD
- Operators building supplier history
- Businesses with frequent deliveries
When it may not be the right move
- Operators already on net terms
- Owners with reserves
- Businesses without deposit history
What you’ll typically need
- Recent business bank statements
- Supplier invoices
- Business details
Frequently asked questions
How long until I get net terms?
It varies by supplier; ask your rep.
Can funding pay suppliers?
Yes; working capital can pay any supplier.
How long does approval take for COD deliveries?
Requests to fund COD deliveries usually get a decision the same day when the file is complete, and funding commonly follows in a business day or two.
Does a 500 credit score rule me out for COD deliveries?
No. Applicants from 500 can be reviewed for COD deliveries; the deposit history does most of the work, and better credit typically improves the terms you are offered.
Paying COD on every delivery?
Apply and build a reserve.
Updated October 6, 2026