Posted in Operations and Supply Chain Terms, Total Reads: 593
Definition: Cash With Order (CWO)
Cash with order is used to define the transactions where the cash is paid to the supplier as soon as the order is placed. Since transaction is happening in cash in advance, it becomes binding for both the parties to honor the agreement. Seller is obligated to deliver the goods as per the order once the payment is done. Similarly, Buyer is obligated to accept the order since buyer has already paid for the order. There is a risk associated with this type of payment.
There is a chance of receiving the substandard quality product or receiving the product not according to required specifications. In such case, Buyers usually does not have the option of full reimbursement.
This approach is the simplest method to follow and takes a very short time to complete the order since there is no credit term associated. Seller is ready to dispatch the products as soon as the order is placed and buyer does not have to monitor the payment to get cleared.
Usually Full payment is not done at the time of placing the order to mitigate the risk and only a partial payment is done. This allows both the seller and buyer to honor the terms of the agreement but also protects the buyers against the substandard goods.