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How to calculate the collection effectiveness index
CEI = (receivables at the start + credit sales − receivables at the end) ÷ (receivables at the start + credit sales − current receivables at the end) × 100
The top of the formula is what you collected in the period. The bottom is what you could have collected: everything that was owed or billed, minus the part that is still not due at the end. CEI is the share of the collectible amount you actually collected. 100% means everything due was paid.
Example: 500,000 at the start plus 300,000 of new billing, with 450,000 owed at the end of which 300,000 is not yet due: collected 350,000 of a collectible 500,000, a CEI of 70.0%.
CEI and DSO
Days sales outstanding tells you how long receivables take to turn into cash, and it moves with sales volume. CEI ignores sales growth and measures only how much of what was due you collected, so it shows the work of the collections team more directly. Track both by month.
How to raise CEI
- Contact customers before the due date, not only after it.
- Contact accounts that agreed to be called in the first days past due, within the contact rules that apply to you.
- Make paying easy during the call: a payment link, a card payment or a new date that the customer commits to.
- Use an AI voice agent for the high volume of early reminders, so collectors can spend their time on the accounts that need negotiation.
Frequently asked questions
What is the collection effectiveness index?
The collection effectiveness index, CEI, measures what share of the receivables available for collection in a period was actually collected. It is expressed as a percentage, and 100% means every amount due was collected.
What is the formula for the collection effectiveness index?
CEI = (beginning receivables + credit sales − ending total receivables) ÷ (beginning receivables + credit sales − ending current receivables) × 100. The numerator is the amount collected, the denominator is the amount that was collectible.
How is CEI different from a collection rate?
A simple collection rate divides payments by the amount billed. CEI also includes balances carried in from earlier periods and excludes amounts that are not yet due, so it measures collections work on everything that could have been collected.
Which period should I use for CEI?
Calculate it monthly and also over a rolling quarter or year. Use the same period for all four inputs, and the same definition of current receivables every time.