The collection effectiveness index (CEI) measures how much of the receivables available for collection in a period a business actually collected, expressed as a percentage where 100 percent means everything collectable was collected. CEI stands for collection effectiveness index. It compares what you brought in against what was realistically there to bring in, so a CEI of 85 percent means you collected 85 percent of what you could have over the period.
It is the cleanest single score for how well your collections function is actually working. Where some metrics tell you how long money takes to arrive, CEI tells you how complete the job was, which makes it the number to watch if you want to judge the collections team rather than the calendar. The closer to 100 percent, the less cash is leaking out as overdue or written-off debt.
Collected vs collectable.CEI is the share of available receivables you actually collected in the period.
100 percent is perfect.It means every dollar that could be collected was, with nothing left overdue.
It grades the team, not the clock.Unlike DSO, CEI measures collection quality rather than speed.
CEI = (beginning receivables + monthly credit sales - ending total receivables) divided by (beginning receivables + monthly credit sales - ending current receivables), multiplied by 100. The top line is what you actually collected; the bottom line is what was available to collect once you set aside the current, not-yet-due invoices. Dividing one by the other shows how much of the collectable balance you converted to cash. Enter your own figures below.
Use figures for the same period. General information, not financial advice.
In the worked example, the business started with 200,000 of receivables, made 300,000 in credit sales, and ended with 160,000 total receivables of which 120,000 was still current. It collected 340,000 of the 380,000 that was collectable, giving a CEI of 89.5 percent. You can run the same maths on the collection efficiency formula calculator when you want to model different scenarios quickly.
A CEI of 80 percent or higher is generally considered good, and consistently above 85 percent points to a strong, well-run collections function. The closer to 100 percent, the less collectable cash is slipping into overdue or bad debt, though the exact target depends on your terms and customer mix.
| CEI | What it signals |
|---|---|
| Below 70% | Weak. A large share of collectable cash is going uncollected. |
| 70% to 79% | Mixed. Collections are working but leaving money on the table. |
| 80% to 89% | Good. A healthy, well-managed collections function. |
| 90% and above | Excellent. Near-complete collection of what was due. |
Treat these as a guide rather than a hard rule. A business selling to slow-paying enterprise customers may run a lower CEI than one dealing in small, prompt invoices, and that can be normal for its market. What matters most is the trend: a CEI sliding month on month is an early warning that collections are losing ground, often well before it shows up in the aging report or your overdue receivables ratio.
CEI measures how much of your collectable receivables you actually collected, while days sales outstanding (DSO) measures how many days it takes on average to get paid. They answer different questions, and the smartest finance teams watch both. One is about completeness, the other about speed.
| Aspect | CEI | DSO |
|---|---|---|
| What it measures | Completeness: the share of collectable cash actually collected. | Speed: the average days an invoice stays unpaid. |
| Best result | Closer to 100 percent. | Closer to your payment terms. |
| Sensitive to sales swings | Less so, as it compares to what was available. | More so, since a sales spike can inflate it. |
The difference matters because the two can move in opposite directions. DSO can look fine while CEI quietly weakens, for instance if a few large invoices are paid fast but a long tail of smaller ones is never chased. DSO is also sensitive to sales swings: a spike in new credit sales can inflate it even when collections are excellent, because the metric is influenced by billing timing as much as collection effort. CEI sidesteps that by comparing collections to what was actually available, which makes it the better gauge of how hard the collections team is working. Read alongside days sales outstanding and your average time to collect, CEI completes the picture: DSO shows how long cash takes, CEI shows how much of it you get.
Improving CEI comes down to collecting more of what is due, sooner, and writing off less. The work falls into a clear sequence, and the gains compound when you run all of it consistently rather than reaching for one lever in isolation.
Contact customers before invoices fall due, follow up promptly the moment they do, and escalate on a consistent schedule rather than when someone remembers.
Make payment easy with clear invoices and simple payment options, so a willing customer is never held up by the process.
Clear queries quickly so one disputed line does not stall a whole balance and drag the index down.
Focus the team on the accounts that move the number most, and automate the routine reminders so people can work the genuinely difficult cases.
Tightening this whole loop also pulls DSO down and lifts the share of cash that lands on time, so the same effort improves several metrics at once.
CEI is a strong score but it is not the whole story. As a single percentage it grades the outcome the team can control, yet a healthy headline figure can still hide trouble underneath. Keep three limits in mind when you read it.
It hides where the gaps sitA single percentage can look healthy while a problem segment or a few chronically late accounts drag underneath it.
It needs clean aging bucketsIf your split between current and overdue receivables is messy, the bottom line of the formula is wrong and the index misleads.
One month can be noisyLike any period metric, a single month carries little signal; it is the trend over several periods that counts.
The fix is to use CEI as a headline and drill beneath it. Pair it with an aging report to see which buckets are dragging, with DSO to add the speed dimension, and with a per-customer view to find the accounts pulling the average down. Used that way, CEI is one of the most honest measures of collections performance a finance team has, precisely because it grades the outcome the team can actually control.
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