The formula, and why it is fairer than DSO
CEI is opening receivables plus credit sales minus closing receivables, divided by opening receivables plus credit sales minus the part of the closing balance that is not yet due, times 100.
The second half is what makes it fair. Money that is still inside its terms was never available to collect, so it is taken out of the denominator. DSO does not do that, which is why a month with unusually high sales flatters DSO even when nothing about your collecting changed.
What a good score is
Above 80% is widely treated as healthy and above 90% as strong. Unlike DSO, the benchmark holds reasonably well across industries, because the ratio is already normalised for how much there was to collect.
A score that falls while DSO stays flat is worth investigating. It usually means sales grew and hid a collections problem.
Use it alongside the aging, not instead of it
CEI scores a period. Aging shows where the risk sits right now. A business can post a decent CEI while carrying one very old debt that will never be paid, because one invoice makes little difference to a ratio and all the difference to a small business. Read both.
Related calculators
- DSO calculatorDays sales outstanding, and what shortening it releases
- AR turnover calculatorThe turnover ratio, and the days to collect behind it
- AR aging calculatorThe balance owed, split by how overdue it is
Questions people ask
What is the collection effectiveness index?
CEI scores how much of the money that was available to collect you actually collected in a period, as a percentage. It excludes receivables still inside their terms, since those were never collectable.
What is the CEI formula?
Opening receivables plus credit sales minus closing receivables, divided by opening receivables plus credit sales minus current receivables, multiplied by 100.
What is a good CEI score?
Above 80% is generally healthy and above 90% strong. The benchmark travels between industries better than DSO does, because the ratio already accounts for how much there was to collect.
How is CEI different from DSO?
DSO is distorted by changes in sales: a busy month shortens it whatever your collecting did. CEI takes sales volume out of the question and scores only the collecting.
What counts as current receivables?
The part of your closing balance that has not yet reached its due date. It was not available to collect during the period, so it is excluded from the denominator.
Can CEI be over 100%?
Yes, briefly, if you collected money that was not yet due, for example a customer paying early. It is not a sign of an error.