Collection Effectiveness Index (CEI)

CMA’s current poll “What methods do you use to measure receivables?” is receiving lots of write-ins for the CEI from Credit Research Foundation (CRF) http://poll.fm/27h9q

From the CRF:

Collection Effectiveness Index (CEI)

Definition: This percentage expresses the effectiveness of collection efforts over time. The closer to 100 percent, the more effective the collection effort. It is a measure of the quality of collection of receivables, not of time.

Formula:

Beginning Receivables + (Credit Sales/N*) – Ending Total Receivables
Beginning Receivables + (Credit Sales/N*) – Ending Current Receivables
X 100
*N = Number of Months or Days

CRF has a great article Performance Measures for Credit, Collections and Accounts Receivable that describes the major measurements and their purpose with formulas.

3 Replies to “Collection Effectiveness Index (CEI)”

  1. I am trying to use the CEI formula above but it is not working. We are trying to use the formula in a weekly aging. Can you use this formula weekly and if so how what number would you use to divide the credit sales by.

  2. I am also facing problem with N in the CEI formula. Considering same “Sales” and “Accounts Receivable” data, if I put N=No. of Month, if it gives a result like 67%, but if I use N=No. of days then it gives like 2.45% (which seems fictitious to me).
    I think in this CEI formula N refers “No of Month” NOT “No of Days”. That’s why I convert No of days in to No of Months, dividing by 30. Can any one suggest, if this is OK? Or, please let me know the appropriate way to use this formula. Thanks…

  3. Wanted to drop a remark and let you know your Rss feed is not functioning today. I tried including it to my Google reader account and got nothing.

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