How to Record Cash on Delivery Collections Held on Behalf of E-Commerce Merchants
Recording cash received from end customers at doorstep delivery as a liability owed to the merchant, not as revenue.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash in Hand (Courier) | Asset (+) | 100.00 | - |
| Due to Merchant (COD Funds) | Liability (+) | - | 100.00 |
💡 Accountant's Note
For companies like Aramex, the cash collected isn't theirs. It's a liability until they transfer it back to the merchant less their delivery fee.
Practitioner & Systems Framework
💻 ERP Architecture
COD (Cash on Delivery) is a significant logistics revenue model in MENA markets (Jordan, Egypt, KSA) where card penetration is lower. The courier collects cash from the end customer and holds it as a liability (Due to Merchant). The courier's revenue is only the delivery fee — not the COD amount. When remitting to the merchant: debit Due to Merchant, credit Cash (for the COD amount), and record the delivery fee as revenue separately. Maintain a COD sub-ledger per merchant showing daily collections, pending remittances, and net position. Remit within the agreed cycle (daily, weekly) — COD float is a credit risk.
⚠️ Audit Flags
Auditors verify the COD cash balance held by drivers is segregated from the courier's operating cash and that the Due to Merchant liability matches the total unremitted COD funds. Unreconciled COD differences (cash collected per system vs. cash handed in by drivers) are a fraud risk — 'leakage' in the COD chain (drivers pocketing COD money) is one of the most common fraud types in last-mile logistics. Daily driver cash-in reconciliation is a critical control.
📄 Required Documentation
COD manifest per driver (shipment, amount collected, merchant reference), driver cash-in receipt, Due to Merchant sub-ledger per merchant, merchant remittance statement, bank transfer to merchant, COD reconciliation (collections vs. hand-ins vs. remittances), and driver COD discrepancy report.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.