Collection Effectiveness Index (CEI)

Concept

DSO tells you how long money takes to arrive; ADD tells you how much of that is lateness. Neither tells you how much of what was collectible you actually collected. That is the Collection Effectiveness Index: the share of receivables available to collect in a period that the team really did collect, expressed as a percentage.

Formula: CEI = (opening receivables + credit sales - closing total receivables) / (opening receivables + credit sales - closing receivables not yet due) x 100. The numerator is the balance residual: opening receivables plus credit sales minus closing total receivables. It equals cash collected only if nothing else reduced receivables. Writeoffs, credit memos and adjustments also reduce the balance and would inflate the numerator, so reconcile those before reading it as collections. The denominator is what was available to collect: everything except the closing balance that is still inside payment terms (you cannot collect what is not yet due).

Worked example

Northwind Billing Co., same 30-day period ending September 30:

Receivables at period start: $395,000
Credit sales during the period: $287,000
Receivables at period end (total): $412,000
Of that, not yet due (still inside terms): $255,000

Balance residual = 395,000 + 287,000 - 412,000 = $270,000 (equals cash collected only if no writeoffs, credit memos or adjustments also reduced the balance)
Available to collect = 395,000 + 287,000 - 255,000 = $427,000
CEI = 270,000 / 427,000 x 100 = 63.2%

Reading it: assuming the residual is all cash collections (no writeoffs or credits in the period), Northwind collected about 63 cents of every dollar that could have been collected that month. CEI near 100% means collections kept pace with what was collectible; a falling CEI means collectible money is being left behind faster than it is being chased.

Assumptions and limits: the numerator counts every reduction in receivables as a collection - writeoffs, credit memos and adjustments must be reconciled out, or CEI is overstated. CEI is a period aggregate; it says nothing about which customers or invoices drove the result.

Calculator

Enter opening receivables, credit sales, closing total receivables, and the not-yet-due portion of the closing balance, all for the SAME period. The tool shows the balance residual, available-to-collect, and CEI with each formula segment.

Accounts receivable at period start ($) Credit sales during the period ($) Total receivables at period end ($) Of that, not yet due, still inside terms ($)

Where Billing Toolkit fits

Moving CEI means improving the mechanics of collection itself: retry schedules, dunning, payment method updates. As Billing Toolkit's capabilities ship and are verified, this page can show where those are managed. Until then this section stays informational.