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  • Writer's pictureJaslyn Lim

Finance for Tabletop Publishers - What is COD?

The course of business never did run smooth. Being a small start-up company in Singapore, one key management issue is customer relationship. In fact, this applies to any company anywhere, not only CGS or Singapore. For a tabletop game publisher, distributors are one of the different customer segments. As mentioned in the “Finance for tabletop publishing series: 5 Revenue Recognition Scenarios” blog, a consignment contract may or may not be entered into with a distributor and settlement can be via “Cash on Delivery” (“COD”) terms. Let’s look into the COD terms in more detail below:

For sales on COD terms – anywhere from 30% to 60% off Manufacturer’s Suggested Retail Price (“MSRP”), cash is received when goods are delivered. Due to this, usually lower risk is associated with COD, which is why the margin from such sales is not high. This reflects the trade-off between obtaining cash up front with a lower margin viz-a-viz having a higher margin albeit with a longer credit term. A company has to evaluate if this is preferred and some factors to consider may include:

· Market practice

· Reputation of the distributor

· Relationship with the distributor

· Cashflow and financial status of the company

Although the risk is low, the risk of default in payment by the distributor still exists. This may happen in cases when delivery of games was made before payment for the goods is performed. “Cash” may be in the form of bank or wire transfer or cheque, which can take a few days to process. The “cash” may either not be banked in or the cheque may bounce for some reason. To mitigate this risk, one way is to request for physical cash payment made upon delivery. However, as the society is moving towards cashless payment in general, cash may very well be obsolete in the not-too-distant future.

Another way to mitigate the risk is to request for payment to be made before delivery is made especially for new distributors. If unfortunately, any non-payment should occur before delivery is made, then delivery can be put on hold immediately.

In the event that the games have been delivered and a default occurs, the company will have to send reminders for payment. If there is no repayment whatsoever after a certain lapse in time, the amount will have to be written off as bad debt. This will form part of the statistics to compute Expected Credit Loss (“ECL”) under FRS 109 Financial Instruments in the future. (ECL was loosely akin to collective impairment or general provision under the past accounting standards.) Needless to say, the distributor will be in the company’s black list. Depending on the situation, the company may decide to seek legal advice or redress to recover the monies owed.

For sales on COD terms, sales are usually recognised when both parties’ obligations are performed. Thus, ownership and title to the goods would have been transferred to the distributor at the same time. There may be scenarios that the distributor may carry out promotions or campaigns without informing the company which may potentially affect the pricing strategies of the company or even affect the reputation depending on the type of promotion or campaign carried out. Albeit the chance of this happening is low, there may still have impact on the company, which the company has to manage. A way is to collaborate with the distributor by supplying marketing materials or collaterals for the promotion.

The above are some scenarios which a company may encounter. To sum it all, customer management is key in any business and is not unique to CGS. As the old saying goes “Customer is King” and this relationship has to be handled with care to ensure satisfaction and continued business, in a sustainable way, of course.

The above is strictly for information purposes only and does not constitute any technical advice. Any opinion is made on a general basis. A professional accountant or auditor or lawyer should be engaged for advice on specific contracts or scenarios.


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