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We live in a data-rich time in history.
It seems like just a few years ago, big data was on the minds of every financial leader. Today we’ve evolved into the era of advanced AI analytics, which has progressed performance management from a paper map into Google Maps. With so many automated reports and dashboard widgets readily accessible in accounting software platforms today, it’s even more important to master Key Performance Indicators (KPIs) for accounts receivable. Financial leaders need to know which levers will generate the best results, optimizing every step of the order-to-cash process.
Whether you’re managing invoicing, payments, cash application, credit, or collections, the right metrics can help you improve cash flow, reduce risk, and enhance your customer experience. Here’s a breakdown of the most impactful KPIs, grouped by AR functional areas. Herein, you’ll gain tangible tips to boost performance and walk away with a simple framework to help you match the best KPIs to your desired business outcomes.
The Best KPIs for Evaluating AR Performance Overall
These KPIs provide a high-level view of how efficiently your AR function is operating. They are often used by leadership to assess liquidity, risk, and operational effectiveness.
Days Sales Outstanding (DSO)
I call DSO “the granddaddy of them all,” because it reflects both cash flow health and collection efficiency in one metric. This explains why it’s one of the most widely measured and foundational KPIs in AR. DSO measures how long it takes to collect payment after a sale. A high DSO may indicate issues in collections or customer experience, while a low DSO suggests effective cash conversion. This metric is also important in today’s economic environment, as it can be an early indicator of client financial health. Learn more about the criticality of AR efficiency in times of economic volatility.
Take caution when using DSO.
DSO is not a standalone metric. It’s interconnected with credit terms, customer experience, and internal processes. Many activities impact DSO, which means financial leaders should not get too fixated on it. DSO is a reflection of your entire AR ecosystem. To improve it, you may need to optimize many activities, some of which include:
- Credit policies
- Invoicing accuracy and speed
- Payment options and incentives
- Cash application automation
Jump to the collections section below to unpack the four biggest influencers of DSO.
BEWARE! DSO is one of the most widely recognized, commonly tracked KPIs in AR, but take caution. It’s not a standalone metric.
Average AR Turnover Ratio
This metric shows how many times a company converts its receivables into cash during a period. A higher turnover indicates faster collections and better credit management. For instance, it can reflect how well your credit policies are working. A high turnover suggests that customers are paying on time, and credit is being extended wisely. A low ratio could suggest risky or slow-paying customers, which may require tighter credit controls or more aggressive collections. A lower ratio may also indicate slow collections, potential credit risk, or inefficiencies in the billing or collections process.
Your turnover ratio is helpful because it is a broad measure of how quickly money owed is collected. Thus, it can serve as a high-level view of a company’s order-to-cash performance and how quickly the finance team progresses through the AR lifecycle.
Tips for Improving AR Turnover:
- Clear payment terms on contracts and invoices
- Timely and accurate invoicing
- Digital or electronic delivery of invoices (email vs. mail)
- Multiple payment options (ACH, card, portal)
- Strong customer relationships and proactive communication
Now let’s look at KPIs for more focused, functional areas of AR.
20 KPIs for Every Phase of AR Operations
 Invoicing KPIs | 1 | Invoice Distribution (ePresentment/eDelivery) |
| 2 | AP Portal Upload Exception Rate | |
| 3 | First-Time Invoice Accuracy | |
 Payments KPIs | 4 | Days to Pay |
| 5 | Touchless Payments | |
| 6 | Payment Mix | |
| 7 | Level 2/3 Interchange Optimization Rate | |
| 8 | Surcharging Recovery Rate | |
 Cash Application KPIs | 9 | Match Rates |
| 10 | Decoupled Remittances | |
| 11 | Machine Learning Adaptation | |
 Collections KPIs | 12 | Collections Effectiveness Index |
| 13 | Receivables Collected | |
| 14 | Days Sales Outstanding | |
| 15 | Average AR Turnover Ratio | |
 Credit KPIs | 16 | Bad Debt Ratio |
| 17 | Application Completion Percentage | |
| 18 | Approval Rates | |
| 19 | Approval Times | |
| 20 | Credit Line Management |
Invoicing KPIs
Invoice Distribution, ePresentment, and eDelivery
Invoice distribution metrics track how invoices are sent (email, print, fax, AP portals) and ePresentment or eDelivery rates refer to what percentage of your total invoices are sent electronically via email or digitally to your clients’ AP portals. The importance of moving from paper to digital formats and boosting eDelivery is critical because it represents the remaining opportunity to make AR operations more automated. Electronic invoices reduce delivery time and improve payment speed. Moreover, an eDelivery rate of 88% can reduce DSO by 5+ days, according to one of Billtrust’s clients. eDelivery is crucial for AR teams aiming to modernize and streamline their invoicing processes but also save on printing and postage fees.
Benefits of increasing your eDelivery include:
- Cash flow improvements, as a faster delivery can mean faster payments
- Lower costs compared to print and mail approaches
- Superior customer experiences and more accurate invoice tracking
- More productivity with touchless invoice generation and presentment
Upload Exception Rate
Measures how often invoices fail to upload correctly to AP portals. High exception rates often point to missing PO numbers or policy misalignment. This metric is growing increasingly important as more clients require invoices to be uploaded to their AP portals, taking more time away from AR departments when these processes are carried out by hand.
First-Time Invoice Accuracy
This KPI ensures invoices are correct the first time they are generated and shared with the customer. As a root cause of manual rework, this performance metric is critical for reducing friction deeper in the order-to-cash cycle. For example, improvements can decrease the number of phone calls to receivables staff, disputes, and short pays or instances when a customer pays less than the full amount invoiced. The outcome? Accelerated payments and stronger cash flow.
Payments KPIs
Days to Pay
Alongside DSO, DTP is another popular metric because it shows the velocity of your buyers’ remittance. It measures the average time between invoice date and payment date. DTP is a great metric to use when companies want to compare their performance against their industry peers, as DTP varies widely across industries and countries.
Billtrust’s analytics module offers a proprietary benchmarking tool that makes industry benchmarking easy. It’s called the Billtrust Days to Pay Index. It allows companies to:
- Contextualize their AR performance rather than relying solely on internal metrics
- Use anonymized data to identify trends and outliers
- Drill down on their own data by customer, portfolio, or collector
Those finance teams with high levels of automation see a bigger reduction on average of Days to Pay (+40%) than those with low levels. Get the research
Touchless Payments
Refers to payments that require no manual intervention during processing. (Touchless payments is in stark comparison to assisted payments.) It’s a key efficiency metric for gauging the productivity of your remittance handling. How many of your payments are processed without human touch?
Payment Mix
Tracks the proportion of payments made via different methods like ACH, card, check, etc. Understanding this helps you optimize costs, but it can also help explain why some payments may take longer to receive than others. It’s also a great view into your customers’ payment preferences and preferred modalities.
Level 2/3 Interchange Optimization Rate
Measures whether enhanced data is being used to reduce interchange fees on card payments. Billtrust can help track and improve interchange fees and aids companies in lowering card acceptance costs.
Surcharging Recovery Rate
Tracks how effectively credit card fees are passed on to customers rather than absorbing them. These typically include the percentage of total card processing fees that are recouped or successfully passed on to customers. Companies may also look at their surcharge waiver rate or how often surcharges are waived—either manually or due to policy exceptions.
The rising popularity of credit cards has suppliers taking a closer look at their payment policies and practices, because sharing these fees with buyers can help offset payment acceptance costs and boost profit margins. Surcharging fees save suppliers money by encouraging their buyers to increase ACH payments and other alternative methods. See how digital payment methods are transforming AR in this recent research.
Many companies like working with Billtrust on virtual card payments and surcharging because our platform allows them to customize payment policies for customer segments. This helps to balance the customer experience and ease of doing business with the costs of payment acceptance.
Cash Application KPIs
Match Rates
These are the leading metric for AR professionals reconciling payments against invoices. Match rate metrics measure how often payments are automatically matched to invoices. It’s a leading indicator of efficiency and digital maturity. More automated matching means fewer manual tasks and fewer exceptions or distractions from more strategic work.
To increasing match rates, companies must use optical character recognition (OCR) and machine learning technologies to automatically read, match, and make sense of invoice and remittance data points that can appear in millions of formats and layouts with various labels. Without these sophisticated AI engines, unstructured data can confuse the machine and generate more exceptions requiring manual intervention. But with AI-driven matching, AR automation platforms can adapt more quickly to each company’s unique data.
Another strategy for increasing match rates is to look at your line-item match rate (rather than the envelope match rate), which can give you a more granular view. One Billtrust customer even looked at match rates broken down by each AR professional, which helped encourage team members to embrace AI after concerns about job displacement. The plan worked! You can learn more about that story here.
Decoupled Remittances
Tracks payments where remittance info is sent separately from the payment itself, which complicates reconciliation. This is a persistent challenge. Customers might send the payment and remittance information (i.e., the details about what the payment is for) through separate channels or at different times. These situations make it harder for both machines and humans to unite fragmented information. Ultimately, reducing the decouple rate can increase match rates.
Machine Learning Adaptation
Refers to the use of AI to improve match rates over time. For instance, enhancements to Billtrust’s ML models are consistently accelerating machine learning, which in turn, improves data accuracy and match rates.
Collections KPIs
Collections Effectiveness Index (CEI)
Measures how much of the collectible AR was actually collected in a given time period. The calculation works by comparing the amount of receivables collected to the total amount of receivables available for collection. The higher your score the better.
Some AR leaders claim CEI is a superior metric when compared to Average Collection Period (ACP) because, as a weighted metric, it gives more importance to high-value invoices and helps assess collection strategies. Here’s a quick example, there’s big difference between a $100 invoice that is 45 days past due and a $10,000 invoice that is 30 days past due. CEI takes this into account, helping AR teams be more strategic in their collections activities.
Calculating CEI
The median CEI in 2024 was 85.42.
Learn how to calculate CEI.
While CEI is sometimes less frequently tracked, here’s why it’s noteworthy:
- CEI indicates collections performance, whereas DSO focuses on timing
- CEI tracks performance during a specific time period, making it easier to make month-over-month comparisons for example
- With 82% of financial decision-makers anticipating a recession in 2025-2026, financial leaders see CEI as having increasing importance as they may need to manage macro-level trends in delinquency and defaults
Explore Billtrust’s CEI analytics dashboard.
Receivables Collected
Tracks the total amount collected, excluding current (not yet due) invoices. This helps assess how well the team is converting overdue AR into cash. Receivables collected can offer good contextual intelligence alongside CEI and DSO.
Days Sales Outstanding (DSO)
As mentioned earlier, this metric is “the granddaddy of them all” for many AR teams. It measures how long it takes to collect payment after a sale and is a liquidity and efficiency indicator. But AR leaders should know that DSO is interconnected with many others. Much like a dancing mobile hanging over a baby’s bed, if you pull one piece it causes all the others to move. DSO is much the same. To illustrate how DSO is influenced by multiple, interdependent factors across the AR lifecycle, here is the breakdown.
The Four Biggest Influencers of DSO
1.
Credit Terms and Risk Tolerance
The length of time you allow customers to pay (e.g., Net 30, Net 60) directly affects DSO. If your credit policies are too lenient, you may see higher DSO due to delayed payments. Conversely, stricter terms may reduce DSO but could also impact customer satisfaction or sales.
2.
Communications and Customer Experience
How you communicate with customers about balances due matters. Are you sending invoices by mail (which takes days) or email (which is instant)? Do you offer self-service portals for quick payments? A poor customer experience—like confusing invoices or limited payment options—can delay payments and inflate DSO.
3.
Payment Method Diversity
The methods you accept (check, ACH, card) and how easy they are to use can influence how quickly customers pay. For example, if you only accept checks, you’re likely to have a higher DSO than if you offer ACH or card payments.
4.
Internal Processes Like Cash Application
Even if a customer pays on time, delays in applying the payment to the correct invoice can artificially inflate DSO. Cash application efficiency—especially auto-matching and reconciliation—play key roles in keeping DSO accurate and low.
Credit KPIs
Bad Debt Ratio
This is a measure of credit risk, making it the most important credit KPI. In simple terms it reveals how much money a company will have to write off. It measures the proportion of receivables that a company does not expect to collect. Moreover, it reflects the effectiveness of credit risk management and helps identify how much revenue is being lost to uncollectible accounts. It also reflects how well credit evaluations are working.
In 2024, net bad debt write offs totaled $20.00 per $100,000 of sales.
Peak Industrial knows how damaging bad debt can be. Before Billtrust, the CFO was writing off about $500,000 every year in bad debt. Today they have less than $200,000 in invoices that are 90 days past due. Finance Director, Ryan Oaks, attributes this success to the efficiency gains their collections team achieves with the Billtrust platform. Hear Ryan’s story
Application Completion Percentage
Tracks how many credit applications are fully completed. Incomplete applications can delay credit extensions and thus sales. Many businesses run into problems with paper applications which can be missing critical details needed to effectively evaluate creditworthiness. Switching from paper to digital formats enables required fields and can improve completion percentages.
Approval Rates
Measures how often credit applications are approved. Most teams aim for high approval rates to avoid blocking sales, but overextending credit can also have consequences. Companies need to carefully balance credit extensions to maximize sales while minimizing financial risk.
Approval Times
Measures how long it takes a company to approve a credit application. Faster approvals support better customer experiences and quicker sales cycles. Many companies aim for 24-hour turn times and come to Billtrust for help in reaching this goal.
Credit Line Management
Tracks how well credit limits are managed, including the percentage of accounts overdue. This metric is important when managing credit risk.
Which KPIs are Best for You? Matching Metrics to AR Maturity
People often ask: Which metrics are best for our AR department? While every company is different, one way to approach this question is to think about metrics and their relationship to the maturity of your AR practice. At Billtrust, we find that those with advanced operational efficiency and process automation prefer different metrics than those that don’t. Here’s a quick look at how that typically comes to life.
| Stage 1 Digitize | Stage 2 Optimize | Stage 3 Elevate | |
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| Metrics Focus |
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| Sample Metrics |
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Focus on the Metrics that Matter Most
By aligning KPIs with each stage of the AR lifecycle—from invoicing and payments to credit and collections—finance teams can move beyond overarching AR metrics like DSO and gain a deeper, more actionable understanding of performance management. Whether you’re optimizing digital adoption, improving match rates for productivity gains, or driving innovation through superior customer experiences, focusing on the right metrics can shift your AR team from chasing payments to driving strategic value across the business.
Ready to rethink your AR metrics dashboard?
See what Billtrust can do for your performance measurement.
This eBook is available to download as a PDF
