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5 KPIs To Track for accounts receivables

KPI #1: Average Days Delinquent (ADD)

Average Days Delinquent (ADD) can help gauge collections performance, essential for brief checkups and overviews. ADD itself is straightforward and easy to calculate as the information needed is typically available and reliable. That information solely contains two data points: the set due date and the date of payment of a receivable, both of which are collected in official invoices and contracts. 

Such a simple calculation seldom is useful in an industry that works to analyze numbers and patterns. The simplicity of ADD avoids the inaccuracies of more complex insight tools while requiring minimal effort from the AR team.

Although the highest achieving firms can decrease their ADD to just below 10 days, average organizations tend to fall around 30 days. If a business has an ADD greater than the average, there may be collections performance problems to resolve. Looking at more sophisticated metrics may help them understand where the problems are stemming from. 

KPI #2: Days Sales Outstanding (DSO)

The most popular KPI tracked for AR is Days Sales Outstanding, or DSO. Its popularity comes from the insight it gives firms regarding specific customers, which is essential in identifying solutions to decreasing the ratio. DSO calculates the typical number of days customers take to complete their payments, which a business can use to track the cash flow at specific stages and customers.

By identifying consistently late payers that are driving up the ratio, DSO can assist in leveraging priorities and the next steps taken to bettering the collections process. This data provides potential problem areas on the customer side that may not have been visible previously. Variations in this rate can tell the business how different strategies and market forces affect payment windows.

However, DSO has its limitations; it only deals with receivables that are already late and thus cannot tell the business how to act prior to the late payment. Again, looking at other metrics can help the business be more proactive with its strategy.

KPI #4: Collections Effectiveness Index (CEI)

Recognizing the inefficiencies in your collections process and how to resolve them is essential for being on top of your cash flow. It can be tough to notice where these inefficiencies come from with only general metrics like DSO. 

The Collection Effectiveness Index, or CEI, pinpoints the effectiveness of the collections department in capturing late payments within a specific window of time. Comparing the percentage of collected payments with the total receivables help businesses recognize if a problem exists. 

The goal is to achieve a CEI above 80% and a drop indicates an obstacle in the collections process that is preventing the execution capacity. The obstacle can include but is not limited to unfavorable customer health, account targeting, or overall team performance.

KPI #5: Operational Cost Per Collection

At times of great changes in market forces and the environment, organizations tend to focus on short-term recovery and growth. But long-term development should also be prioritized when making business-wide decisions.

The Operational Cost Per Collection KPI is very relevant and important in bolstering developments in the collections process. It acknowledges the collection team’s execution capacity and uses data beyond only receivables to determine how to maximize the capability in efforts to provide a greater number of collections at lessened costs.

As a long-term tool, this KPI will most likely not produce short-term solutions. It also will not be able to compare a single firm’s performance with its competitors as it only pulls data from the single firm. But when used properly, it can help guide major decisions in the AR team, especially with the realization of how important being proactive can be in finding internal opportunities within an organization. 


The accounts receivable KPIs mentioned above can become crucial in revamping the AR team’s efficiency by presenting multiple perspectives on performance, challenges, and actions moving forward. An AR team that is attentive to their performance today can maximize their execution capacity to develop their operations process and ultimately increase inflowing cash.

Would you like to discover how businesses like yourselves can achieve a decreased DSO and accelerated payments, generating over 10x ROI using Payference?

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