Data powers performance, and AI automation has made data-driven decision making easier than ever. But with dashboards full of metrics, the challenge has become knowing how to focus on the critical few. That’s why mastering the right key performance indicators (KPIs) for accounts receivable is essential. When every activity impacts cash flow, risk, and customer experience, having the right metrics couldn’t be more critical.
As AR rapidly transitions from a back-office task to a strategic growth engine, finance leaders need to know which KPIs will generate the best results – helping them guide better decisions that optimize every step of the order-to-cash (O2C) process.
If you want to lead your AR operation with greater clarity and control, download our ebook that outlines the top 20 KPIs for AR and keep reading for three practical strategies for turning KPIs into your team’s most powerful guidance tool.
Strategy 1: DSO Isn’t the Be-All. Go Beyond It.
Days Sales Outstanding (DSO) is the “most watched” and for good reason. It’s well-known, easy to explain, and gives a quick read on two big things: how healthy your cash flow is and how efficient your collections are. Most ERP and AR platforms include DSO by default on dashboards and reports.
But for all its popularity, DSO isn’t the end-all, be-all. It doesn’t tell the full story.
It tells you how many days on average it takes to get paid, but not why. Of course, the “why” matters – and part of the problem is that there’s no single answer. DSO is shaped by everything from credit policies and invoice accuracy to how easy it is for customers to pay. Because it offers macro-level insight, it’s not always the best diagnostic tool. Knowing specifically how to respond and how to improve isn’t always crystal clear.
At the same time, that doesn’t mean the path toward improvement is missing. DSO is influenced by these four big activities, which are often the root cause:
- Credit terms and risk tolerance: How much time you give customers to pay has a direct impact on DSO. If your terms are too generous, payments can drag out and inflate DSO. Tighten them too much, however, and you might hurt sales or customer relationships. It’s all about finding the right balance between cash flow and customer flexibility.
- Communications and customer experience: How you communicate about balances due makes a big difference. Slow delivery (ex: email or snail mail) means slower payments. Faster access to invoice and account information (ex: self-service portal) means faster receivables. You set the pace.
- Payment methods: Payment policies influence DSO. The easier you make it for customers to pay, the quicker the money comes in. Check usage remains high in the world of B2B payments, yet so do the inefficiencies and risks. ACH, cards, and digital portals make the payment process faster and smoother, often cheaper.
- Internal processes like cash application: Even when customers pay on time, internal delays can throw off DSO. If payments aren’t applied accurately or quickly, your metrics will take a hit. That’s why automation – especially smart matching and reconciliation – is essential for keeping DSO low and predictable.
Strategy 2: Align KPIs with Each Stage of the AR Lifecycle
Whether it’s trying to get invoices out faster, better understand payment behavior, or see how much you’re collecting and how efficiently, every stage of the AR cycle has its own purpose and challenges. It’s essential to align KPIs with the specific stage of the AR process you’re trying to improve. Otherwise, you’ll risk misdiagnosing the problem.
For example, if you’re only tracking collections metrics to gauge performance but not looking at invoicing metrics, you could end up blaming your collections team for problems that actually started earlier in the O2C process.
Let’s look at some of the metrics that matter most at every step.
Invoicing: Faster, Cleaner Invoices Avoid Delays and Confusion
Invoice distribution
How you send invoices directly affects speed of payment, customer experience, cost, efficiency, and automation potential. This metric provides a distribution snapshot: what channels you’re using for sending invoices (email, print/mail, AP portals, fax) and how digitally mature your invoicing process is.
ePresentment (or eDelivery)
Your eDelivery rate refers to what percentage of your total invoices are sent electronically via email or digitally to your clients’ preferred AP portals. This metric is one of the biggest levers AR teams can pull to modernize operations. For teams looking to scale and streamline, this metric is a must-watch.
Between now and 2030, global eInvoicing compliance requirements will shift from trend to norm. If you’re a multinational or international business, you need to start strategizing. Get advice from Deloitte in Billtrust’s 2025 eInvoicing Compliance Report.
Payments: Smoother Customer Processes, Lower Costs
Days to Pay (DTP)
DTP measures how long it takes customers to pay after receiving an invoice. Unlike DSO, it reflects actual payment behavior – not internal delays. You can break it down by customer or segment to spot trends and adjust payment terms. It’s a helpful KPI for managing cash flow and improving collections.
Payment mix
Payment mix shows how your customers are paying – ACH, credit card, check, and so on. It helps you understand what’s fast, what’s costly, and where you can improve. For example, checks slow things down, while ACH is faster and cheaper. Tracking this mix helps reduce costs and encourage more efficient payment methods.
Cash Application: Less Matching, More Value
Match rate
Match rate shows how many payments are automatically linked to the correct invoices. The higher the rate, the less manual work your team has to do. It’s a key sign of how efficient and automated your cash application process is, especially as you adopt AI and machine learning.
Decoupled remittances
This tracks how often payment details (remittance information) are sent separately from the payment itself. When that happens, it slows things down and creates more manual work. Keeping an eye on this metric helps you spot problem areas and reduce reconciliation delays.
Collections: Efficiency without Affecting Critical Relationships
Collection Effectiveness Index (CEI)
CEI shows how much of your outstanding receivables are actually collected during a set period. Unlike DSO, it focuses on the value of what you should be collecting – not just how fast. A high CEI means your collections strategy is working. It’s a useful way to track performance over time.
DSO
We’ve already talked about the dangers of over-relying on DSO. You can’t fixate on the number without understanding what’s causing it as that will only provide surface-level “solutions” that don’t move the needle.
Credit: Approve the Right Clients Quickly, Avoid the Wrong Ones
Application completion percentage
This shows how many credit applications are fully filled out. Incomplete applications slow down approvals – and thus, sales. A low completion percentage can point to confusing forms or clunky onboarding. Tracking this helps speed things up, reduce risk, and keep deals moving.
Bad debt ratio
This metric measures the portion of receivables that have been written off as uncollectible. A high ratio could mean you’re approving risky customers or missing red flags. It’s key for tracking credit risk and protecting revenue over time.
Peak Industrial knows how quickly bad debt can add up. Before working with Billtrust, the company was writing off nearly $500,000 annually. Today, less than $200,000 in invoices are over 90 days past due. See how they drive more efficient collections.
Strategy 3: Match Metrics to Your AR Automation Maturity
Not every metric makes sense for every team. What’s valuable in a manual, reactive AR environment may be irrelevant or even misleading in a highly automated one. This is why the KPIs you track should evolve alongside your AR automation maturity.
Think of it this way:
- Reactive teams are often dealing with siloed data, paper-based processes, and mostly manual workflows. Their priority is stabilizing performance and getting a clear picture of effectiveness and compliance. Foundational KPIs like DSO, DTP, receivables collected, and AR turnover help these teams get grounded and identify major problem areas.
- Proactive teams are starting to integrate systems, automate workflows, and scale operations. Their focus shifts to productivity, efficiency, and cost. Metrics like touchless payment rates, surcharging metrics, match rates, application approval rates, and average days to credit approval (ACP) provide visibility into what’s working and where to streamline further.
- Innovative teams operate with a unified ecosystem, high levels of automation, and a focus on predictive insights and customer experience. At this level, metrics should support innovation and forward-thinking decisions. That includes KPIs like invoice distribution, machine learning (ML) adaptation, application completion percentage, and CEI – all of which help teams optimize, personalize, and proactively manage AR performance.
Use your maturity level as a strategic filter. It’s not just about tracking more data. It’s about tracking the right data for where you are now and where you want to go.
Unlock Deeper Insights and Better Outcomes
Leading finance teams don’t just report on performance – they drive it. These KPI strategies are meant to give you a sharper view of AR performance and the control to steer results in the right direction.
Learn more about the best KPIs for accounts receivable with Billtrust’s strategic guide to performance metrics.
