Collection effectiveness index (CEI): formula and how to use it

The collection effectiveness index (CEI) measures how much of your collectible receivables you actually collected in a period, expressed as a percentage. A CEI of 100% means you collected everything that was due; a lower number shows how much collectible cash you left on the table.

CEI is the quality counterpart to DSO. DSO tells you how fast you collect, but it can be skewed by the timing of large sales. CEI strips that out by asking a sharper question: of the cash that could have been collected, how much did you actually get? That makes it one of the most honest reads on how well a collections function is run.

CEI formula

The formula compares cash collected against cash that was collectible, using current receivables to isolate what was genuinely due.

CEI = ((Beginning receivables + Credit sales - Ending total receivables) / (Beginning receivables + Credit sales - Ending current receivables)) x 100

The numerator is what you collected. The denominator is what you could have collected, which excludes current (not-yet-due) receivables, since those were never overdue in the first place.

A worked example

Take a quarter with these figures:

• Beginning receivables: 400,000
• Credit sales for the quarter: 1,200,000
• Ending total receivables: 350,000
• Ending current receivables (not yet due): 280,000

Numerator (collected):

400,000 + 1,200,000 - 350,000 = 1,250,000

Denominator (collectible):

400,000 + 1,200,000 - 280,000 = 1,320,000

CEI = (1,250,000 / 1,320,000) x 100 = 94.7%

A CEI of 94.7% is excellent. The team collected nearly all of what was realistically collectible. The 5.3% gap is the cash that aged past due and stayed unpaid through quarter end.

CEI vs DSO

DSO and CEI answer different questions, and watching both gives a fuller picture.

• DSO measures speed. It is sensitive to when sales land in the period, so a spike in late-quarter sales can inflate DSO even when collections are healthy.
• CEI measures completeness. It is harder to distort with timing, because it compares actual collections to what was available to collect.

A team can show a flat DSO while its CEI slips, which means overdue cash is quietly piling up even though the headline number looks stable. Reading them together catches problems that either one alone would miss.

What is a good CEI

As a rough guide:

• 90% and above: world-class. Almost nothing collectible slips through.
• 80% to 90%: healthy and well-run.
• Below 80%: a meaningful share of collectible cash is going uncollected, and the process needs attention.

Unlike DSO, where the target depends on your terms, higher CEI is always better. The ceiling is 100%, and the distance to it is the size of your collections opportunity.

How to improve CEI

CEI improves when you work every collectible account, not just the loudest ones.

1. Cover the whole ledger, not the top accounts. CEI leaks come from the long tail of mid-sized invoices that no one has time to chase.
2. Follow up consistently, every period. The accounts that erode CEI are usually the ones that got skipped, not the ones that refused to pay.
3. Resolve disputes fast. A disputed invoice is collectible cash sitting frozen. Clearing the dispute quickly returns it to the collectible pool.
4. Prioritize by overdue amount and age. Put effort where the collectible gap is largest.

How Rex pushes CEI toward 100%

CEI rarely fails because a few accounts refuse to pay. It fails because most accounts get partial attention and many get none. Rex closes that gap by working every collectible account every period, not just the squeaky wheels. It follows up across the entire ledger continuously, so the mid-sized invoices that normally slip past a stretched team get the same persistent attention as the large ones.

When an account needs a human, a dispute to resolve or a payment plan to approve, Rex escalates it and keeps the rest of the book moving. The result is a collections process that consistently captures the collectible cash, which is exactly what CEI measures. See how Rex runs collections end to end.