What are the most important accounts receivable KPIs?

While Days Sales Outstanding (DSO) is widely watched, a comprehensive view includes metrics for each stage of the AR lifecycle. Key KPIs include Invoice ePresentment rate, Days to Pay (DTP), payment mix, cash application match rate, and the Collection Effectiveness Index (CEI).

Why is relying only on DSO a mistake for performance management?

DSO gives a high-level view of how long it takes to get paid, but it doesn’t explain the underlying reasons for delays. Factors like credit terms, invoicing methods, payment options, and internal cash application processes all influence DSO, so focusing on it alone won’t reveal the specific areas needing improvement.

How should a company's AR KPIs evolve?

The KPIs you track should match your AR automation maturity. Early-stage, reactive teams should focus on foundational metrics like DSO and CEI. As teams become more proactive and automated, they should adopt efficiency-focused KPIs like touchless payment rates and cash application match rates to streamline operations further.

What is the Collection Effectiveness Index (CEI)?

CEI measures the percentage of outstanding receivables that are collected during a specific period. Unlike DSO, which focuses on time, CEI focuses on the value of what you successfully collect, offering a clear indicator of how effective your collections strategy is.