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More in Collections & Bad Debts
How do you record the recovery of a previously written-off account? What is the percentage-of-sales method for estimating bad debt? What is credit insurance and how does it protect receivables? How do you prioritize collections to maximize cash recovery? How do payment plans help recover distressed receivables? What legal/regulatory considerations apply to collections? How does dispute management connect to collections and bad debt? How do CECL and IFRS 9 change bad-debt estimation for receivables? What escalation options exist when internal collections fail? How do you handle receivables when a customer files for bankruptcy?
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Accounts Payable & Receivable › Collections & Bad Debts

What is the collection effectiveness index (CEI) and why use it?

Intermediate

Answer

CEI measures the percentage of available receivables actually collected in a period, factoring beginning AR, credit sales, and ending current vs total AR. Unlike DSO, it isn't distorted by sales timing, so it's a cleaner gauge of collection performance—100% means everything collectible was collected.
CEI = (Beginning AR + Credit Sales - Ending Total AR)
      / (Beginning AR + Credit Sales - Ending Current AR) x 100.
Real-world example A CEI of 92% tells management collections captured most of what was collectible, independent of sales fluctuations.

Common follow-ups: How does CEI differ from DSO? | What does 100% CEI mean?

Aging Analysis Credit Control Collections & Bad Debts
All 23 Collections & Bad Debts questions