Collection Skills Training Magazine Section

Days Sales Outstanding A/R Turnover RatioCOLLECTION EFFECTIVENESS INDEX (CEI):                                                                            onlinecalculator iconOnline CEI Ratio Calculator

Collection Effectiveness Index compares ‘what was collected’ out of ‘what was available to collect’ in a given period of time. The closer the CEI is to 100% the higher is the degree of collection effectiveness. In broader terms CEI accesses the percentage of open receivables a credit granting organization is able to recover/resolve/negotiate/accomplish within a specific period of time.

Formula for a given period:

Beginning Receivables + Monthly Credit Sales - Ending Total Receivables  X 100

Beginning Receivables + Monthly Credit Sales  - Ending Current Receivables

Where    Monthly Credit Sales = Credit Sales/N

Where    N = Number of Months

Formula for a 1 year period:

Beginning Receivables + (Credit Sales) - Ending Total Receivables  X 100

Beginning Receivables + (Credit Sales) - Ending Current Receivables

Illustration: CEI Calculation          
               
Sample ATB            
    Sales A/R Current 31-60 61-90 90+
    (on Credit terms) Balance        
               
  Jan                        3,390          6,200          3,345          1,795         1,000               60
  Feb                        3,610          6,000          3,560          1,550             825               65
  Mar                        3,890          6,340          3,590          1,800             900               50
               
  Total (Jan-Mar)                      10,890          
               
               

CEI for the period Jan to March (3 Months):

Period = N = 3 months = 3

Credit Sales = 10,890

Beginning Receivables = 6,200

Ending Total Receivables = 6,340

Ending Current Receivables = 3,590

CEI = 55.9%

onlinecalculator icon Online 'Collection Effectiveness Index' Calculator

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