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Collections Effective Index (CEI) is a metric many organizations are looking at to evaluate the effectiveness of their receivable management process.
CEI focuses on the quality of collection efforts over time by determining the percentage of open receivables an organization is able to recover or resolve within a given time period.
CEI can also provide valuable insight into the strength and administration of an organization's credit policy. The higher the CEI, the more likely the organization is making sound decisions based on well-constructed guidelines. As CEI drops, organizations should re-examine their credit policy, as this may be an indication that they are extending credit to companies that are not truly creditworthy.
The formula for calculating CEI:
N = Number of months or days in the period you are assessing.
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