The Collections Effectiveness Index (CEI) is a percentage measuring how much of the receivables available to collect in a period a business actually collected. 100% means everything collectable was collected.
Why it matters in B2B collections
CEI answers a question DSO cannot: not how long cash took to arrive, but how much of what was genuinely available you managed to bring in. That distinction matters when sales are growing, because a rising sales base mechanically pulls DSO down and can flatter a collections team that has not improved at all. CEI is measured against what was collectable, so growth does not distort it the same way.
How Collections Effectiveness Index is calculated
CEI = [ (Beginning AR + Credit Sales - Ending Total AR) / (Beginning AR + Credit Sales - Ending Current AR) ] x 100The denominator uses ending CURRENT receivables, not ending total. This is the part most explanations get wrong. Current receivables are excluded from what was collectable because they were not yet due within the period, so counting them would penalise a team for not collecting money nobody owed yet.
Worked example
- Beginning receivables: 800,000
- Credit sales in the month: 1,200,000
- Ending total receivables: 950,000
- Ending current receivables (not yet due): 700,000
- Numerator: 800,000 + 1,200,000 - 950,000 = 1,050,000
- Denominator: 800,000 + 1,200,000 - 700,000 = 1,300,000
CEI = (1,050,000 / 1,300,000) x 100 = 80.8%
Why the current bucket is excluded
The logic of the denominator is worth understanding, because it is what makes CEI fair. Anything still within terms at period end was never collectable during that period: it was not due. Subtracting ending current receivables removes it from the pool the team is judged against. What remains is the money that genuinely could have been collected, which is the only sensible basis for scoring collections performance.
CEI and DSO disagree in a useful way
When the two metrics diverge, the gap is informative. DSO improving while CEI stays flat usually means sales grew rather than that collections improved. CEI improving while DSO stays flat often means the team is collecting the collectable balance well, but terms or invoicing lead times are holding the cycle back, which is a commercial problem rather than a collections one. Tracking both is what makes each interpretable.
Pick a period and keep it
CEI is period-sensitive, so a monthly CEI and a quarterly CEI on the same ledger will differ, and neither is more correct. What matters is choosing one and holding it constant, because CEI is only meaningful as a trend. A single reading in isolation tells you little; twelve consecutive monthly readings tell you whether the function is improving.
Collections Effectiveness Index: common questions
How do you calculate the Collections Effectiveness Index?
What is a good CEI score?
Is CEI better than DSO?
Go deeper: Improving collections performance.
How this connects to other terms
- DSO (days sales outstanding)
CEI and DSO answer different questions and are best read together.
- Accounts receivable (AR)
CEI scores how effectively the AR ledger was converted to cash.
- Unapplied cash
Unapplied receipts understate CEI as well as inflating DSO.