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Cash & receivables

CEI calculator — collection effectiveness index

Calculate your collection effectiveness index from beginning AR, credit sales and ending receivables. See what you collected against what was collectable.

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Short answer

Collection effectiveness index measures how much of the receivables you could have collected in a period you actually collected. CEI = (beginning AR + credit sales − ending total AR) ÷ (beginning AR + credit sales − ending current AR) × 100. With $2,150,000 beginning AR, $3,400,000 credit sales, $2,480,000 ending AR and $1,910,000 of that still within terms, CEI is 84.3%.

DSO tells you how long money takes to arrive. It cannot tell you whether your collectors did a good job, because a big invoice raised on the last day of the month pushes DSO up while nobody has done anything wrong. The collection effectiveness index fixes that by only counting money that was actually due.

Enter the four balances below. You get CEI, the cash you collected against the cash that was available to collect, the overdue balance that explains the gap, and what closing that gap to your target would release.

Your numbers

$

Total trade receivables at the start of the period. Must equal last period's closing balance.

$

Invoiced on terms only. Cash and card sales sit outside the metric.

$

Closing trade receivables, net of credit notes.

$

Invoices whose due date had not passed at period end — a terms test, not an invoice-date test.

days

Only used for the DSO cross-check below.

%

What you are trying to reach next quarter.

Result

Collection effectiveness index
84.3%

$3,070,000 collected out of $3,640,000 that was collectable

Cash collected in the period$3,070,000
Amount available to collect$3,640,000
Shortfall (closing overdue AR)$570,000
Overdue share of closing AR23.0%
Cash unlocked at 90% CEI$206,000
Simple DSO, same period21.9 days
Collected$3,070,000
Left uncollected but due$570,000
Collected = $2,150,000 + $3,400,000 − $2,480,000 = $3,070,000
Collectable = $2,150,000 + $3,400,000 − $1,910,000 = $3,640,000
CEI = $3,070,000 ÷ $3,640,000 × 100 = 84.3%
Shortfall = $3,640,000 − $3,070,000 = $570,000 (= closing overdue AR)
84.3% means about 16 cents of every collectable dollar stayed put — $570,000 in total. Check reminder cadence, the dispute queue and unapplied cash on account before adding headcount.

Everything is computed in your browser. Nothing you type is sent anywhere or stored.

The formula

CEI = (Beginning AR + Credit sales − Ending total AR) ÷ (Beginning AR + Credit sales − Ending current AR) × 100
Beginning AR
Total trade receivables at the start of the period, net of credit notes.
Credit sales
Invoiced on terms during the period. Cash and card sales sit outside the metric.
Ending total AR
Total trade receivables at the close of the period.
Ending current AR
The slice of ending receivables that is not yet due. Anything past its due date is excluded.

The numerator is the cash you brought in. The denominator is the cash you could have brought in — everything except invoices that had not yet reached their due date. The gap between them is exactly your ending overdue balance, which is why CEI is unaffected by a sales spike late in the period.

Worked example

Beginning AR
$2,150,000
Credit sales in period
$3,400,000
Ending total AR
$2,480,000
Ending current AR (not yet due)
$1,910,000
Result
CEI = 84.3%

Collected: $2,150,000 + $3,400,000 − $2,480,000 = $3,070,000. Collectable: $2,150,000 + $3,400,000 − $1,910,000 = $3,640,000. CEI = 3,070,000 ÷ 3,640,000 = 84.3%. The $570,000 shortfall is not an abstraction — it is precisely the overdue balance sitting in your closing ageing. Reaching 90% would have released about $206,000 of that.

Why the collection effectiveness index beats DSO for judging a team

Both numbers use the same raw data. The difference is what each one holds against your collectors. DSO holds them responsible for invoices that are not yet due; CEI does not. Run both — DSO for the board pack, CEI for the weekly collections review.

QuestionCEIDSO
What it measuresShare of collectable receivables actually collectedAverage age of the receivables balance
Reacts to a late-month sales spikeNo — sales appear in both numerator and denominatorYes — the balance rises with nothing collectable behind it
Fair to the collections teamYes, directlyOnly once you subtract terms
Needs ageing detailYes — ending AR must be split into current and overdueNo
Quoted externallyRarelyRoutinely, and benchmarked
Use CEI to manage, DSO to report. They answer different questions.

Reading your result

CEIWhat the arithmetic is telling youWhere to look first
Above 95%Almost nothing that could be collected was left behind. The residue is disputes and invoices raised in the last few days.Check the current/overdue split is right before celebrating.
85% to 95%A normal working month with a recoverable tail.The three largest overdue balances, not the oldest ones.
70% to 85%Roughly one collectable dollar in five stayed put.Reminder cadence, dispute queue, unapplied cash on account.
Below 70%This is structural, not effort. Something upstream is stopping payment.Invoice accuracy, PO and receipt matching, terms granted outside credit control.

Getting the four inputs right

  • Ending current AR is the input people get wrong. It means invoices whose due date has not passed at period end — not the "Current" column of a report that buckets by invoice date. On net-30 terms those are two different figures.
  • Beginning AR must equal last period's ending AR. If it does not, someone has posted into a closed period and your CEI series has a break in it.
  • Net off credit notes in both AR figures. A credit-note backlog otherwise reads as poor collections.
  • Exclude cash sales from credit sales, exactly as you would for DSO, or the denominator inflates and CEI flatters the team.
  • Keep the period short. CEI over a month is a management number. Over a year it averages away the month you need to talk about.

Moving the number

CEI only rises when overdue cash comes in, so the levers are narrow and known: contact before the due date rather than after it, work the ageing by value, clear the dispute queue weekly, and apply cash the day it lands. Unapplied receipts are the cheapest win — the money is already in the bank and still counted against you.

The hard part is the split. Most ERPs will give you total AR instantly and make you fight for "receivables past due date at period end, net of credit notes, by subsidiary". With you ask for that in words and get the figure plus the query that produced it, so you can check the definition of "current" instead of trusting it.

Frequently asked questions

What is a good collection effectiveness index?

Above 95% means nearly everything collectable was collected, and 85–95% is a normal working month with a recoverable tail. Below 70% usually points at invoice quality or disputes rather than collector effort. Set your own target from your own trend rather than comparing to an unsourced industry figure.

How is CEI different from DSO?

DSO measures how old your receivables balance is, including invoices that are not yet due. CEI only counts money that had reached its due date, so a large invoice raised on the last day of the month raises DSO but leaves CEI untouched. CEI judges collections; DSO describes the balance.

What counts as ending current AR?

Invoices whose due date has not yet passed at period end. That is a terms-based test, not a date-of-invoice test: an invoice raised 40 days ago on net-60 terms is still current. Many ageing reports bucket by invoice date, which will give you the wrong denominator.

Can CEI be over 100%?

Not legitimately. It happens when ending current AR is entered larger than ending total AR, or when a prior-period adjustment breaks the beginning balance. Current receivables are a subset of total receivables, so the denominator can never be smaller than the numerator. Recheck the split first.

How often should you calculate CEI?

Monthly, alongside the ageing report, and review the trend over at least six periods. Weekly CEI is possible if your ageing snapshot is reliable, but short periods make disputes and single large payments dominate the result. Annual CEI hides the month you actually need to discuss.

Does CEI include invoices in dispute?

Yes, once they are past due, and that is deliberate. A disputed invoice is uncollected cash regardless of whose fault the dispute is. If disputes are large enough to distort the picture, track them as a separate line under the CEI rather than removing them from the denominator.

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Read the background

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