Collections Effectiveness Index
Evaluates the effectiveness of a company's collections efforts over a specific period. Collections Effectiveness Index (CEI) indicates how well a company is converting its accounts receivables into cash. A CEI close to 100% indicates effective collections.
(Beginning Receivables + Monthly Sales - Ending Total Receivables) / (All Beginning Receivables + Monthly Sales - Ending Current Receivables) x 100
If your company has a beginning A/R of $100,000, monthly sales of $200,000 and ending total A/R of $120,000, the collections effectiveness index would be calculated as: CEI = ($100,000 + 200,000 – 120,000) ÷ (100,000 + 200.000 – 120,000) x 100 = 100%