Collections Effectiveness Index (CEI)
Measure of how effectively the AR team collects receivables in a period
What is Collections Effectiveness Index (CEI)?
Collections effectiveness index measures how well a business collects the money owed to it in a period. It compares the receivables collected with the amount that could have been collected.
Unlike days sales outstanding, it is less affected by sales swings, so it is a cleaner read on collections performance.
How this KPI is measured
- Function
- Finance
- Sub-function
- Accounts Receivable
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- score (0–100)
- Measurement frequency
- Monthly / Quarterly
- Formula
- ((Opening AR + Credit sales − Closing AR) / (Opening AR + Credit sales − Current AR)) × 100
How to calculate it
Take opening receivables plus credit sales minus closing receivables, and divide by opening receivables plus credit sales minus current (not yet due) receivables. Multiply by 100.
For example, with opening receivables of 1,000,000, credit sales of 4,000,000, closing receivables of 1,200,000 and current receivables of 900,000, the index is (1,000,000 + 4,000,000 - 1,200,000) / (1,000,000 + 4,000,000 - 900,000) x 100 = 92.7.
Scores near 100 mean nearly everything collectable was collected.
Where it is used
Judging collections performance
Compare periods and teams.
Separating collections from sales effects
Get a cleaner view.
Setting collector targets
Give clear goals.
How to improve it
Tips and common mistakes
- Use it alongside days sales outstanding.
- Compare over the same period length.
- Ensure current and overdue splits are accurate.
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