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6 KPI’s to help you measure your credit control


You already know how important it is to have a robust good credit control strategy, and it’s likely that you have processes in place to ensure key activities are achieved. But how can you measure your credit control performance to pinpoint problem areas and track improvements, and what do you do with this information?

While there are always things you can try to improve performance (our credit control tips page provides a few ideas), it’s not enough just to implement these methods and then sit back and hope they make a difference.

How can you identify the areas that require improvement and the impact of any changes you make? The answer lies in the metrics and reporting you have in place which can help you make informed decisions.

To help you get started gathering the right data, we’ve pulled together our top 6 KPI’s to analyse your accounts receivable performance.

Days Sales Outstanding (DSO)

This metric is one of the most frequently used, and it’s also one of the most important in terms of tracking your credit control performance.

It determines the average length of time it takes for your business to collect money from customers, and is calculated using the formula below:

(Accounts receivables / Total sales) x Number of days

When interpreting this metric, it’s important to bear several things in mind:

Bearing these points in mind, DSO can be a great way to track performance over time and measure the impact of any large scale changes you have made to your accounts receivable procedures.

It can also help you to determine the priority level of improving your credit control when compared against your industry average.

If you’re looking for ways to improve your DSO (and reduce late payment), you’ll find this article helpful.

Collection Effectiveness Index (CEI)

Another commonly used metric that provides a high level overview is CEI. It provides a percentage value that represents how much of any money owed to you in a given period was successfully collected.

For example, if in a month you managed to collect all of what was owed to you, with no payments left outstanding either from before or during that month, your CEI for the time period would be 100%.

The formula for calculating CEI is:

(Beginning receivables + Monthly credit sales – Ending total receivables) / (Beginning receivables + Monthly credit sales – Ending current receivables) x 100

CEI can be analysed alongside DSO, and you would expect to see them moving in opposite directions. If your DSO has gone down consistently over a set period where your CEI has gone up, this would suggest things are changing for the better.

Related pages:

Accounts receivable turnover rate (ART)

ART can be used to get a measure of cash flow and liquidity in your business. It measures how frequently accounts receivable are turned into cash.

The more frequently you are collecting, the better your cash flow is likely to be, and this can be calculated with the following formula:

Net credit sales / Average accounts receivable

Average days delinquent (ADD)

ADD should be used alongside your DSO to draw more accurate conclusions. It indicates the effectiveness and efficiency of your processes at collecting receivables on time.

DSO – Best possible DSO

Your best possible DSO is calculated using the following formula:

(Current receivables x Number of days in invoicing period) / Credit sales for period

When comparing the ADD and DSO, you should be looking to see whether they are moving up and down together (plotting both metrics on a graph may make this easier to see). If they are, you can determine that your ability to collect receivables is either improving or declining.

When the two statistics are moving in different directions, this indicates that something else may be going on to cause the change in your DSO and it will require further investigation before you draw any conclusions.

Download our guide

Right party contacted (RPC) and Promise to pay (PTP) rate

These two statistics are often used by debt collection agencies, and tracking them can help you identify where you may be falling short in your collections efforts.

Your RPC rate tells you the percentage of outbound calls that result in you talking to the person with whom the debt is associated.

If this number is very low, it may be that you have a problem with identifying or contacting the right person, and you could consider adjusting your strategy around this. Maybe you could try asking for multiple contact details earlier in the buying process, for example by using account opening forms, or maintain regular contact with clients before payments become overdue to develop a more open communication with them.

Your PTP rate covers the next step. It should indicate how many outbound calls result in the debtor making a promise to pay.

If your RPC is high but your PTP is low, this could indicate an issue with your approach to collection phone calls, and it may be worth seeking training or guidance for the person responsible for making them.

Number of Revised Invoices

Although not a standard metric, keeping track of invoices that have been revised or disputed and the reasons could help you identify further areas for improvement.

It could be something as simple as adjusting the layout of your invoice to make certain information more apparent, or considering accepting a different payment method, such as BACS.

You can look for patterns in the type of customers that dispute invoices, the problems they have and how they were resolved, and use this to help shape your new strategy going forward by addressing potential issues upfront and better predicting accounts where there may be a problem down the line.

How we can help you to improve your credit control performance

At Hilton-Baird Collection Services, we have been helping businesses of all sizes to improve their credit control since 2001, providing a range of debt recovery and confidential credit control services to improve results for our clients and valuable outsourced resource and expertise.

To discuss your requirements and discover the difference we can make to your collections efforts, simply contact us today by calling 0800 9774848, requesting a call back or getting an instant debt recovery quote.


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