Do you track your progress meticulously? If not, you definitely should. After all, it's very difficult to improve what you aren't measuring.
And even if you have been tracking your performance, it's always good to periodically take a look at your performance measures. While most use DSO to measure how well they're getting paid, we think that the Collection Effectiveness Index is a great measure for how well you are collecting your receivables.
The Collection Effectiveness Index was developed by Dr. Venkat Srinivasan, formerly of eCredit.com, in cooperation with the Credit Research Foundation. CEI is a percentage that expresses the effectiveness of collection efforts over time. The closer to 100 percent, the more effective the collection effort. It is a measure of the quality of collection of receivables, not of time.
If you've never used this, try plugging your own numbers in here to see where you stand in this important measurement of credit department performance!
Here's the formula:
Beginning A/R + (quarterly credit sales/3) - Ending Total A/R
---------------------------------------------------------------------- X 100
Beginning A/R + (quarterly credit sales/3) - Ending current A/R