What is the formula for the Collection Effectiveness Index (CEI)?

CEI = [(Opening receivables + Period sales − Closing receivables) / (Opening receivables + Period sales)] × 100. For example, with €500,000 opening receivables in January, €400,000 January sales and €300,000 closing receivables: CEI = [(500,000 + 400,000 − 300,000) / (500,000 + 400,000)] × 100 = 66.7%.

What is the difference between CEI and DSO?

DSO measures the average number of days to collect a receivable — it is affected by seasonality and sales volumes. CEI measures the operational effectiveness of the collections team — it is far less sensitive to volume fluctuations. A deteriorating DSO can be caused by a mechanical effect (high sales volume at period end) or by genuine deterioration. CEI allows you to distinguish between the two.

What is a good CEI in B2B collections?

A CEI above 90% is considered excellent. Between 80 and 90%, collections are good with some room for improvement. Between 70 and 80%, a process review is recommended. Below 70%, priority action is needed.

CEI (Collection Effectiveness Index): Definition and Calculation

Q: How often should you calculate CEI?

Monthly. Quarterly frequency smooths variations too much and delays problem detection. For high-volume teams, bi-monthly or weekly calculation may be relevant.

Q: Should CEI be calculated at global level or by segment?

Ideally both. A global CEI can mask deterioration in specific segments — a sales rep, a geography, a client profile. Segmented calculation allows you to precisely identify where collections effectiveness is deteriorating.

Q: Does a high CEI necessarily mean good collections?

Not necessarily. A high CEI with a very long DSO may indicate you're recovering receivables but with significant delay. The combined analysis of CEI + DSO + BPDSO (Best Possible DSO) gives a complete picture of collections performance.

DSO tells you how many days on average your clients take to pay you. CEI tells you whether your collections team is doing its job well.

These two indicators are complementary, and many finance teams only use the first.

Definition of CEI

The Collection Effectiveness Index (CEI) measures the percentage of recoverable receivables that were actually collected over a given period.

A CEI of 100% means all receivables that could have been recovered were. In practice, a CEI above 80% is considered solid.

CEI Formula

CEI = [(Opening receivables + Period sales − Closing receivables) / (Opening receivables + Period sales)] × 100

Worked example:

Opening receivables January: €500,000
January sales: €400,000
Closing receivables January: €300,000

CEI = [(500,000 + 400,000 − 300,000) / (500,000 + 400,000)] × 100 = 66.7%

This result means 66.7% of recoverable receivables in January were collected.

CEI vs DSO: What's the Difference?

Indicator	What it measures	Limitation
DSO	Average days to collect	Affected by seasonality and sales volumes
CEI	Collections team effectiveness	Doesn't account for client quality
BPDSO	DSO if all clients paid on time	Measures potential, not performance

A deteriorating DSO can be caused by high sales volume at period end (mechanical effect) or by genuine deterioration in payment behaviour. CEI allows you to distinguish between the two.

How to Interpret Your CEI

CEI	Interpretation
> 90%	Excellent — very effective collections
80–90%	Good — some room for improvement
70–80%	Average — process review recommended
< 70%	Weak — priority action needed

Why CEI Is a Better KPI Than DSO Alone

DSO is sensitive to volume fluctuations. A business that doubles its revenue in December will mechanically see its DSO increase in January, even if its collections are perfect. CEI is much less sensitive to this effect.

Second advantage: CEI measures the operational effectiveness of the team, not client behaviour. It's the right tool to evaluate whether your reminder process is working, independently of external factors.

For further reading: Real DSO vs Reported DSO: Why Your ERP Is Misleading You

Frequently Asked Questions About CEI

How often should you calculate CEI?

Monthly. Quarterly frequency smooths variations too much and delays problem detection.

Should CEI be calculated at global level or by segment?

Ideally both. A global CEI can mask deterioration in specific segments, a sales rep, a geography, a client profile.

Does a high CEI necessarily mean good collections?

Not necessarily. A high CEI with a very long DSO may indicate you're recovering your receivables but with significant delay. The combined analysis of CEI + DSO + BPDSO gives a complete picture.