CEI leaves out invoices that are not yet due at the end of the period, so it measures collection work separately from sales volume and payment terms. Finance teams usually report it monthly, next to days sales outstanding and the accounts receivable aging report.
Collection effectiveness index formula
CEI equals beginning receivables plus credit sales minus ending total receivables, divided by beginning receivables plus credit sales minus ending current receivables, times 100. The four inputs come from your ledger and aging report.
| Input | What it means |
|---|---|
| Beginning receivables | All unpaid invoices at the start of the period |
| Credit sales | Invoices issued during the period, excluding cash sales |
| Ending total receivables | All unpaid invoices at the end of the period |
| Ending current receivables | Unpaid invoices at the end of the period that are not yet due |
The top of the fraction approximates what you collected. The bottom is what you could have collected, meaning everything except invoices still within terms at the end. The gap between them equals the past-due balance at the end of the period, so CEI cannot go above 100%.
Example. In June a company starts with $450,000 of receivables and issues $300,000 of invoices on credit. On June 30 total receivables are $370,000, of which $290,000 is not yet due.
- Collected equals $450,000 plus $300,000 minus $370,000, which is $380,000.
- Collectible equals $450,000 plus $300,000 minus $290,000, which is $460,000.
- CEI equals $380,000 ÷ $460,000 × 100, which is 82.6%.
The $80,000 gap is the past-due balance on June 30. Had the team collected another $40,000 of it, CEI would have been 91.3%.
How to read the collection effectiveness index
A CEI of 100% means nothing was past due at the end of the period, and every point below that is money that fell due and was not collected. No accounting body sets a benchmark, so track your own monthly figure and look into any month that falls well below your recent average.
Two things distort the result. Write-offs and credit notes reduce ending receivables just as payments do, so a large write-off raises CEI without any cash coming in. Unapplied payments do the opposite and leave paid invoices in receivables, so match payments and report write-offs separately before you compare months.
CEI, DSO and average days delinquent
DSO shows how many days of sales are tied up in receivables, and it moves with sales volume and payment terms. Move customers from 30-day to 60-day terms and DSO rises by about 30 days even if every invoice is paid on its due date, while CEI stays at 100%. CEI shows what share of the money that fell due came in, but not how long it took, so read the two together.
Average days delinquent (ADD) shows how many days beyond terms customers pay on average. It equals DSO minus best possible DSO, and best possible DSO equals current receivables divided by credit sales for the period, times the number of days in the period.
Example. With the June figures, DSO is $370,000 ÷ $300,000 × 30 = 37 days and best possible DSO is $290,000 ÷ $300,000 × 30 = 29 days, so ADD is 8 days. CEI tells you what share of the money due came in, and ADD turns the past-due balance into days. For a view based on how many times receivables turn over in a year, see the accounts receivable turnover ratio.
Monthly or quarterly CEI
CEI is usually calculated monthly from month-end balances and the month's credit sales. For a quarter, use receivables at the start of the quarter, credit sales for all three months and balances at the quarter end.
A quarterly CEI usually comes out higher than the monthly figures, because the bottom of the fraction includes three months of sales while the past-due balance is a single snapshot. Compare months with months and quarters with quarters.
Sunbay connects to your ERP or accounting system, matches incoming payments to invoices using ERP data and reports DSO and receivables aging, so the current and past-due balances behind CEI reflect what is still open. Every reminder, AI voice call and customer reply sits next to the invoice, which makes it easier to explain a month when CEI drops. See Sunbay analytics and insights.
Frequently asked questions
What is a good collection effectiveness index?
The closer to 100%, the better, because 100% means nothing was left past due. There is no official benchmark, so compare your CEI with your own history and judge the trend over several months rather than one figure.
What is the difference between CEI and DSO?
DSO measures how many days of sales sit in receivables and changes with sales volume and payment terms. CEI measures what percentage of the money that fell due you collected, so it isolates the work of collecting.
Can CEI be more than 100%?
No. The gap between the top and bottom of the formula equals receivables past due at the end of the period, which cannot be negative. A result above 100% points to a data problem, such as current and total receivables taken from different reports or dates.
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