The collection Effectiveness Index (CEI) refers to the key performance indicator used in accounting to measure the quality of the collection processes. This metric helps in determining how effectively the collection strategies are adopted to ensure timely payments and stable cash flow for the business.

Now you know what the collection effectiveness index is, let&#39;s discuss how to calculate it and why it is important in accounts receivable management.

<ul>
	<li>
	What is the collection effectiveness index in accounts receivable?
	</li>
	<li>
	What&#39;s the difference between the collection effectiveness index and DSO?
	</li>
	<li>
	How to calculate the collection effectiveness index (CEI)?
	</li>
	<li>
	Why is the collection effectiveness index (CEI) important?
	</li>
	<li>
	How to maintain a good collection effectiveness index?
	</li>
</ul>

&nbsp;

<h2>What is the collection effectiveness index in accounts receivable management?&nbsp;</h2>

In accounts receivable, Collection Effectiveness Index (CEI) is an important metric that can help AR collections teams identify the efficacy of their collection methods. It helps the business understand the performance of the credit control and collection teams.

When it comes to accounts receivable management, it is crucial to understand how the collection strategies are working for the business, and whether invoices are paid on time without disrupting the business&#39;s revenue. Hence, the collection effectiveness index gives an idea of the same, and it is calculated with the accounts receivables collected over a specific period.

Most often, the collection effectiveness index is confused with <a href="https://www.maxyfi.com/blog/days-sales-outstanding" target="_blank">Days Sales Outstanding (DSO)</a>, since both of them have almost similar interpretations. But they are different metrics to measure different values.

Let&#39;s have a look at the differences between CEI and DSO.

&nbsp;

<h2>What&#39;s the difference between the collection effectiveness index and DSO?</h2>

&nbsp;&nbsp;

<table>
	<tbody>
		<tr>
			<td>
			Collection Effectiveness Index
			</td>
			<td>
			Days Sales Outstanding
			</td>
		</tr>
		<tr>
			<td>
			Measures the quality of the collection processes.
			</td>
			<td>
			Measures the time taken to collect the receivables.
			</td>
		</tr>
		<tr>
			<td>
			Determines the effectiveness of the collection processes.
			</td>
			<td>
			Determines the average number of days taken to collect receivables.
			</td>
		</tr>
		<tr>
			<td>
			Higher CEI indicates regular timely payments and good-performing collections team.
			</td>
			<td>
			Lower DSO indicates strong collection policies and faster cash flow.
			</td>
		</tr>
	</tbody>
</table>

&nbsp;

The powerful combination of CEI and DSO provides valuable insights into your collection methods, the health of your cash flow as well as the performance of the collections team. It is an efficient tandem for any business to manage its accounts receivable while bringing in revenue.

&nbsp;

<h2>How to calculate the collection effectiveness index (CEI)?&nbsp;</h2>

&nbsp;

<div style="background:#eeeeee; border:1px solid #cccccc; padding:5px 10px">(Beginning AR + Credit Sales/N) - Ending Total AR&nbsp;&divide; (Beginning AR + Credit Sales/N) - Ending Current AR</div>

&nbsp;

Beginning AR: The Accounts Receivable amount collected at the beginning of the period.

Credit Sales/N: The number of credit sales made during a specific period, where N refers to the number of days.

Ending Total AR: The open receivables collected, current and overdue, at the end of the period.

Ending Current AR: The total collections received for credit sales made during the period.

&nbsp;

<h2>Why is the collection effectiveness index (CEI) important?&nbsp;</h2>

The collection effectiveness index is a financial ratio that can provide insightful information on your credit control management. It helps you understand the efficiency and performance of the collections team in collecting the receivables timely.

The effectiveness of the collection team to turn unpaid invoices into cash flow is one of the strongest strengths of a business. Thus, the CEI shows the quality of the collection team&#39;s work, bringing cash flow to the business.

It also measures the rigidity of your collection practices, helping your business understand how the strategies are working for accounts receivable collection. It is important because it gives you increased visibility into your credit control policies, and helps identify how you can improve them to increase timely collections.

The CEI can be used to identify the effectiveness of the collection methods in a business over a particular period, like every month.

&nbsp;

<h2>How to maintain a good collection effectiveness index?&nbsp;</h2>

A good collection effectiveness index (CEI) that is near 90-100% indicates that maximum accounts receivable are collected on time, or that the collections team is efficient in collecting all the accounts receivable timely.

&nbsp;

<h2>&nbsp;Here&#39;s How You Can Achieve A Near 100% CEI!&nbsp;</h2>

<ul>
	<li>
	Send Accurate And Correct Invoicing On Time
	</li>
	<li>
	Offer Different Payment Options For Seamless Transactions
	</li>
	<li>
	Improve Your Credit Policies And Payment Terms, Especially With Delinquent Accounts
	</li>
	<li>
	Improve Customer Communication For Positive Experience
	</li>
	<li>
	Automate Reminders And Follow-up With Customers Regularly
	</li>
</ul>

&nbsp;

If you haven&#39;t been able to monitor your accounts receivable lately and gather in-depth insights and KPIs, then you need to try automating your accounts receivable.

It&#39;ll save you a lot of time and resources while letting the <a href="https://www.maxyfi.com/" target="_blank">accounts receivable&nbsp;automation</a> software track and keep a record of all the useful insights such as the collection efficiency rate.

Stay tuned to our <a href="https://www.maxyfi.com/blog" target="_blank">blog</a> for more accounts receivable terminology, industry updates, and tips!

&nbsp;

&nbsp;

Read the blog to understand collection effectiveness index and how it can help improve your accounts receivable collection strategies for better cash flow.

Maxyfi | Accounts Receivable Collection Effectiveness Index

Collection Effectiveness Index (CEI)

Do you know, 51% of small businesses don&#39;t use any cloud accounting or financial books?

Yes, that&#39;s right!

In this age of deep-rooted technology and innovation taking over every aspect of our lives, there are still businesses and service providers who manually handle the accounting and finances, either with spreadsheets or pen and paper.

According to a survey by SMB Group, 51% of small businesses with around 1-20 employees don&#39;t use any cloud accounting software to manage their accounts receivable.

Among them, 30% of them use spreadsheets to maintain records of their finances and receivables, while 21% of them don&#39;t use any tool or software to keep a check on their financial growth.

Well, here&#39;s the catch.

What if the business wants to automate its accounts receivable management?

Let&#39;s take this discussion a step at a time.

&nbsp;

<h2>A Case Scenario&nbsp;- Without Cloud Accounting Books</h2>

Imagine yourself having a business that does not rely on any cloud-based accounting software but instead depends on your co-workers to handle the accounts receivables manually.

One day, you and the other executives in your business decide that it would be better to automate the accounts receivable process.

You then look for accounts receivable automation software that can improve the collections cycle while reducing the DSO of the business.

However, none of them allows you to add data manually or upload your accounting files, but instead, ask to integrate your cloud-based accounting books which you don&#39;t have.

You are lost now, out of options while your business&#39;s cash flow is still stuck and your team is trying their best to revive the collections faster.

This is where Maxyfi comes in.

&nbsp;

<h2>Maxyfi &ndash; Upload Accounts Receivable &amp; Automate For Better&nbsp;&nbsp;</h2>

&nbsp;

Maxyfi, <a href="https://www.maxyfi.com/">Accounts Receivable Automation</a> Software, enables you to upload accounting files in .csv format or use the template provided to add the data manually.

This feature is developed with the inclusive needs of every business in mind and stands apart from the rest of the other accounting solutions because it allows companies to integrate data without having a cloud accounting book.

Thus, Maxyfi makes <a href="https://www.maxyfi.com/account-receivable/features" target="_blank">automating accounts receivable</a> accessible for every business, irrespective of the tool or software they use to record their data.

All you need to do is sign up and upload your data with a few clicks, and everything is integrated into the software quickly and effortlessly!

Each detail is taken with great care to ensure that all kinds of businesses can avail of the software, for better accounts receivable collections and revenue growth.

The accounts receivable automation software empowers your business to follow up regularly with industry-best workflows, customizable templates, and a dedicated customer portal to communicate efficiently with customers.

All in all, Maxyfi helps your business improve collections, reduce DSO and stay on top of the cash flow always.

To know more about Maxyfi&#39;s unique stand-out features that make collecting accounts receivable simple yet efficient, stay tuned to our <a href="https://www.maxyfi.com/blog">maxyfi blog</a>.

We&#39;ll surely come back to you with more and better!!

&nbsp;

&nbsp;

No cloud accounting books to automate your accounts receivable? Read the blog and learn how to automate your AR process without accounting book APIs.

APIs to Automate Accounts Receivable?

No Accounting Book APIs to Automate Accounts Receivable? We Have A Solution!

The right&nbsp;<a href="https://www.maxyfi.com/about">accounts receivable management</a> can positively impact the business&#39;s cash flow and assets.

When accounts receivable are managed efficiently, it can result in an improved collection cycle, faster payments, better customer relationships, and increased cash inflow. Or else your business will struggle with slow or no payments leading to cash flow disruptions, bad debts, and credit risks!

Thus, it is crucial to have an Accounts Receivable Manager who can efficiently handle and maintain the accounts receivable on behalf of the company.

An AR Manager also has to manage the team and ensure they work following the company&#39;s principles, while overseeing timely accounts receivable collections, handling no-show payments, and performing credit checks, invoicing, and billing processing.

As an AR Manager, you have to carry the weight of the company&#39;s accounts receivable on your shoulders which can be burdensome. Instead of spending a lot of time and resources, it&#39;s best to invest in advanced accounting solutions like automation and make accounts receivable management easier.

&nbsp;

<h2>Accounts Receivable Automation&nbsp;</h2>

Accounts receivable automation or AR automation refers to automating the accounts receivable management activities such as creating worklists, following up regularly, sending reminders, auditing data, and other monotonous tasks.

An AR Manager needs to implement automation in accounts receivable management because it can enhance the accounts receivable process, making it less tedious and more streamlined for the team. This can also help you receive detailed reports, gather insights on payment collections, handle customer disputes, and perform credit checks efficiently.

&nbsp;

<h2>Digitalize Accounts Receivable Management&nbsp;</h2>

By digitally transforming the accounts receivable process and automating repetitive tasks, AR managers can delegate activities that motivate the team to add value to the business, such as focusing on improving customer experience, etc. It helps the AR manager to have a more hands-on approach to the team, relentlessly supporting them and encouraging streamlined operations.

This will enhance the work productivity as well as empower the team to devise better collection strategies, and communication techniques and bring dynamic solutions to the table.

With automation, Accounts receivable managers can effectively monitor invoicing and billing procedures, oversee timely payment collections, document dispute cases and handle them constructively. It also aids them in keeping detailed and accurate records, implementing better debt collection strategies, and ensuring proper functioning at each step of the collection process.

Automating accounts receivable management can also help the business in the long run. By initiating an advanced step into technology and innovation such as accounts receivable automation software, AR managers can elevate the financial growth of the business.

An <a href="https://www.maxyfi.com/">accounts receivable automation</a> software can simplify AR processes, and ensure efficient collection cycles and timely payments. This will give the business the cash flow and working capital to grow, develop and strive in the industry. After all, cash flow is the principal asset of every business to promote its full functioning.

Ultimately, automation can streamline accounts receivable management while ensuring better cash flow for the business, thus making it all the simpler for AR managers!

Make work simpler now with Maxyfi, and keep your team happy!

<a href="https://id.maxyfi.com/auth/realms/maxyfi/protocol/openid-connect/auth?client_id=mx-bs-fe&amp;redirect_uri=https%3A%2F%2Fapp.maxyfi.com%2F%3F_gl%3D1*17ag26v*_ga*NzQzOTA5NzQ5LjE2NjE3NzA3OTA.*_ga_ZSR29M9FZD*MTY2NzYyNjQ3Ni42MS4xLjE2Njc2Mjk4NjcuMC4wLjA.&amp;state=ac91a594-9d1b-40fc-a224-c1c3282e5903&amp;response_mode=fragment&amp;response_type=code&amp;scope=openid&amp;nonce=8124cd1e-73b8-4ece-a567-4f0271d43678">Get started here</a> to automate your accounts receivable management and stick around for more industry updates and tips on accounts receivable management with Maxyfi!

&nbsp;

&nbsp;

An AR Manager oversees the accounts receivable on behalf of the company while managing the team. Learn how automation can simplify the AR process!

Maxyfi | Accounts Receivable Automation For AR Managers 

Accounts Receivable Automation For AR Managers 

Do I need Accounts Receivable Automation Software When I have Quickbooks Free Reminders? Let&#39;s find out. 
 
To analyze this we need to understand the need, challenge, the impact it creates, and then&nbsp;the solution we should use to address it. 
 
Cashflow is the critical component for every Credit Based Businesses. Even your customers want to hold on to their cash for their critical and prioritized payments. The most important aspect of Accounts Receivable is how to position yourself on your customer&#39;s Prioritized List. That&#39;s when Businesses have a dedicated Accounts Receivable Department or Function. 
 
The accounts receivable function is the most critical function that converts revenue into cash. When this function is done manually, it doesn&#39;t help to create the appropriate rigor or seriousness in customers due to reasons like casual tone and irregular reminders, mistakes in communication, time-Intensive activity, lack of team collaboration, lack of auditing and transparency, and weak management insight and control. 
 
With such a critical function, there is a need to have a tool that&#39;s purpose-built to solve these challenges. When we look at Quickbooks, which is the most popular accounting and bookkeeping software (the purpose it was built for), also has additional provision to send reminders via Email, and that&#39;s just the tip of the iceberg, <a href="https://www.maxyfi.com/" target="_blank">Accounts Receivable Automation</a> is a lot more and lets&#39; see what it needs :

<ul>
	<li>Configuring AR Workflows based on Email, Call, and SMS</li>
	<li>Personalize and standardize your AR Dunning messages</li>
	<li>Automate most of your communications giving your team the bandwidth to focus on High-value interaction</li>
	<li>Human Centric Action and Communication integrations like Confirmation and Reminders for Promise made by the customer</li>
	<li>Assign and track your teamwork without much effort</li>
	<li>Generate great insights and reports instantly from the app</li>
	<li>Customer 360 View that gives total transparency and Deep-dive audit when needed.</li>
</ul>

&nbsp;

To summarize, an app that improves the AR Team&#39;s efficiency and productivity thereby improving the cash flow! 
 
It&#39;s not Quickbooks vs Maxyfi, rather it&#39;s the winning combination of Quickbooks with Maxyfi which gives you the best of Accounting and Book Keeping (Quickbooks) with the Best of <a href="https://www.maxyfi.com/account-receivable/features" target="_blank">Accounts Receivable Automation </a>(Maxyfi). 
 
Sounds interesting, right? Book a demo on how seamlessly the accounts receivable automation connects and works with Quickbooks. 
 
You can also try it out here, we have a limited-time $40 package.

Do you need accounts receivable automation software when you have QuickBooks free reminders? Read the blog and find out! 

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