{"id":21123,"date":"2024-10-16T07:03:48","date_gmt":"2024-10-16T07:03:48","guid":{"rendered":"https:\/\/www.mooninvoice.com\/blog\/?p=21123"},"modified":"2026-04-29T10:39:05","modified_gmt":"2026-04-29T10:39:05","slug":"accounts-receivable-metrics","status":"publish","type":"post","link":"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/","title":{"rendered":"What Are Accounts Receivable Metrics? Define Their Types"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_11 counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list ez-toc-list-level-1\"><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/#What_Are_Accounts_Receivable_KPIs\" title=\"What Are Accounts Receivable KPIs?\">What Are Accounts Receivable KPIs?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/#13_Accounts_Receivable_Metrics_to_Consider\" title=\"13 Accounts Receivable Metrics to Consider\">13 Accounts Receivable Metrics to Consider<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/#Value_of_Accounts_Receivable_KPIs\" title=\"Value of Accounts Receivable KPIs\">Value of Accounts Receivable KPIs<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/#Our_Ending_Words\" title=\"Our Ending Words\">Our Ending Words<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/#Frequently_Asked_Questions\" title=\"Frequently Asked Questions\">Frequently Asked Questions<\/a><\/li><\/ul><\/nav><\/div>\n<p><em><script type=\"application\/ld+json\">\n    {\n      \"@context\": \"https:\/\/schema.org\",\n      \"@type\": \"FAQPage\",\n      \"mainEntity\": [{\n        \"@type\": \"Question\",\n        \"name\": \"How to Set KPI for Accounts Receivable?\",\n        \"acceptedAnswer\": {\n          \"@type\": \"Answer\",\n          \"text\": \"To set KPI for accounts receivable, one needs to choose metrics that offer insight into how effectively the business collects the payment. You can follow the below steps - <\/p>\n<p>Define the business goals \nChoosing the relevant KPIs\nSetting up realistic targets\nMonitor AR KPIs regularly \nAdd the performance reviews\"\n        }\n      }, {\n        \"@type\": \"Question\",\n        \"name\": \"What Is the Process to Measure Accounts Receivable?\",\n        \"acceptedAnswer\": {\n          \"@type\": \"Answer\",\n          \"text\": \"Professionals can follow any process because there are numerous ways to measure accounts receivable. They can consider the AR to sales ratio, accounts receivable turnover ratio, and days sales outstanding. However, the choice of measuring depends on your objectives and the specific information you wish to obtain.\"\n        }\n      }, {\n        \"@type\": \"Question\",\n        \"name\": \"What Is an Ideal AR to AP Ratio?\",\n        \"acceptedAnswer\": {\n          \"@type\": \"Answer\",\n          \"text\": \"Usually, AR to AP ratio which is greater than 1:1 is considered to be good. Some other ratios are as follows - <\/p>\n<p>1:1 or lower - Not a good ratio as it indicates, business needs to take the loans if the income drops. <\/p>\n<p>2:1 - Business is healthy <\/p>\n<p>3:1 - It\u2019s an excellent ratio, indicating a business is earning three times as much as its investment.\"\n        }\n      }, {\n        \"@type\": \"Question\",\n        \"name\": \"What Is a Healthy Account Receivable?\",\n        \"acceptedAnswer\": {\n          \"@type\": \"Answer\",\n          \"text\": \"A healthy account receivable indicates the ability of a business to receive on-time payments and has minimum risk of bad debts. Some other characteristics of good accounts receivable are -  <\/p>\n<p>Low days sales outstanding\nFavorable aging of accounts receivable \nHigh accounts receivable turnover ratio \nStrong cash collections effectiveness index \nPositive cash flow from receivables \nCash collection policies\"\n        }\n      }, {\n        \"@type\": \"Question\",\n        \"name\": \"What Are the AR Aging Benchmarks?\",\n        \"acceptedAnswer\": {\n          \"@type\": \"Answer\",\n          \"text\": \"Account Receivable (AR) aging benchmarks help business professionals measure the health of their receivables by measuring how long customer invoices remain unpaid. Usually, there are aging buckets based on a 30-day increment. There are four time period categories in the standard AR aging.<\/p>\n<p>Current (0 to 30 days) - Invoices which are not past due \n31 to 60 days past due - Invoice which is overdue by 1 to 30 days\n61 to 90 days past due - invoice which is overdue by 31 to 60 days \n91+ days past due - invoice which is overdue by more than 60 days\"\n        }\n      }]\n    }\n    <\/script><\/em><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\/\",\n  \"@type\": \"BlogPosting\",\n  \"mainEntityOfPage\": {\n    \"@type\": \"WebPage\",\n    \"@id\": \"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/\"\n  },\n  \"headline\": \"What Are Accounts Receivable Metrics? Define Their Types\",\n  \"description\": \"Learn about key accounts receivable metrics to track and improve your business\u2019s cash flow. Understand DSO, AR turnover, and other essential metrics.\",\n  \"image\": {\n    \"@type\": \"ImageObject\",\n    \"url\": \"https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2024\/10\/16062657\/What-Are-Accounts-Receivable-Metrics-Define-Their-Types.jpg\",\n    \"width\": \"1200\",\n    \"height\": \"700\"\n  },\n  \"author\": {\n    \"@type\": \"Person\",\n    \"name\": \"Jayanti Katariya\"\n  },\n  \"publisher\": {\n    \"@type\": \"Organization\",\n    \"name\": \"Moon Invoice\",\n    \"logo\": {\n      \"@type\": \"ImageObject\",\n      \"url\": \"https:\/\/cdn.mooninvoice.com\/image\/images\/logo.svg\",\n      \"width\": \"254\",\n      \"height\": \"47\"\n    }\n  },\n  \"datePublished\": \"2024-10-16\",\n  \"dateModified\": \"2024-10-16\"\n}\n<\/script><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Are_Accounts_Receivable_KPIs\"><\/span>What Are Accounts Receivable KPIs?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Account receivable is money that the company pays for the offered service and product. However, this is unpaid money. In simple words, this is unpaid money due from the client&#8217;s end after availing of the service or buying the product.<\/p>\n<p>Top accounts receivable KPIs are some metrics that offer a clear picture of a company&#8217;s liquidity. The account team or other high authorities can track these metrics to identify the following options &#8211;<\/p>\n<ul class=\"custom-disc-list\">\n<li>Determine the issues related to customer average payments<\/li>\n<li>Measure the rate of customers&#8217; payment<\/li>\n<li>Evaluate the effectiveness of the accounts receivable process<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"13_Accounts_Receivable_Metrics_to_Consider\"><\/span>13 Accounts Receivable Metrics to Consider<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-21131\" src=\"https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2024\/10\/16062752\/13-Accounts-Receivable-Metrics-to-Consider.jpg\" alt=\"13 Accounts Receivable Metrics to Consider\" width=\"1200\" height=\"700\" srcset=\"https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2024\/10\/16062752\/13-Accounts-Receivable-Metrics-to-Consider.jpg 1200w, https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2024\/10\/16062752\/13-Accounts-Receivable-Metrics-to-Consider-300x175.jpg 300w, https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2024\/10\/16062752\/13-Accounts-Receivable-Metrics-to-Consider-1024x597.jpg 1024w, https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2024\/10\/16062752\/13-Accounts-Receivable-Metrics-to-Consider-768x448.jpg 768w, https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2024\/10\/16062752\/13-Accounts-Receivable-Metrics-to-Consider-150x88.jpg 150w\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<h3>1. Days Sales Outstanding (DSO)<\/h3>\n<p>DSO analyzes and measures the rate at which your customers are paying their bills. Divide the total accounts receivable balance by the average daily sales revenue. A low DSO shows a better performance.<\/p>\n<p><strong>DSO Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>DSO = Accounts Receivable \/ Total Credit Sales x Number of Days<\/strong>\n<\/div>\n<p>Calculating DSO is beneficial to track issues related to the accounts receivable process. You <a href=\"https:\/\/www.mooninvoice.com\/blog\/how-to-improve-dso\/\">must maintain the DSO rate<\/a> as low as possible. A high DSO represents on time collection of the cash.<\/p>\n<p>Let us understand DSO through an example. Suppose your company has a receivable balance of $6,000 per month. The total sales revenue in the month is $20,000. The DSO will be as follows &#8211;<\/p>\n<p>6,000\/20,000 x 30 = 9<\/p>\n<p>So the day&#8217;s sale outstanding is 9.<\/p>\n<h3>2. Average Days Delinquent (ADD)<\/h3>\n<p>This accounts receivable metric indicates the average number of days your client takes to make the payment.<br \/>\nADD is useful for determining bad debt. It also improves accounts receivable operations. This AR metric is crucial and should not be ignored at any cost. Otherwise, your business finances will be badly affected. So, you need to track this metric carefully.<\/p>\n<p><strong>ADD Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>ADD = Regular DSO &#8211; Best possible DSO<\/strong>\n<\/div>\n<p>Let&#8217;s take an example. If the regular DSO of your company is 30 days and the best possible DSO is 20 days, then ADD is 10 days.<\/p>\n<p>ADD = 30 &#8211; 20 = 10<\/p>\n<p>This indicates it takes 10 days for customers to pay for their invoices.<\/p>\n<h3>3. Collection Effectiveness Index (CEI)<\/h3>\n<p>This AR metric shows the effectiveness index of collecting money. It is also connected to the financial losses provoked from bad debts. It is also related to the financial losses. An 80% or over CEI is considered the best one.<\/p>\n<p>CEI is calculated by dividing the number of overdue accounts by the total number of active accounts receivable.<\/p>\n<p><strong>CEI Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>CEI = (Beginning A\/R + monthly credit sales &#8211; ending total A\/R) \/ (all beginning receivables + monthly credit sales &#8211; ending current receivable) x 100<\/strong>\n<\/div>\n<p>Let&#8217;s take an example of your company which has the following figures<\/p>\n<ul class=\"custom-disc-list\">\n<li>Beginning A\/R of $200,000<\/li>\n<li>Monthly credit sales of $400,000.<\/li>\n<li>Ending total A\/R of $140,000<\/li>\n<li>Ending current AR of $120,000<\/li>\n<\/ul>\n<p>Then, according to the formula<\/p>\n<p>CEI = $200,000 + $400,000 &#8211; $140,000\/ $200,000 + $400,000 &#8211; $120,000 x 100<\/p>\n<p>CEI = $460,000\/ $480,000 x 100 = 95%<\/p>\n<p>A CEI of 80% is considered good, so 95% is a good CEI for your company.<\/p>\n<h3>4. Aging Reports<\/h3>\n<p>Aging reports are important financial documents that represent the <a href=\"https:\/\/www.mooninvoice.com\/blog\/outstanding-invoice\/\" target=\"_blank\" rel=\"noopener\">outstanding invoices<\/a> of a company. These outstanding invoices are categorized by the time they have been overdue. Therefore, businesses can track these unpaid invoices easily. Ultimately, this accounts receivable metrics report helps to manage cash flow, estimate bad debt, and create a strategy for better credit and collections processes.<\/p>\n<p>Some key components of aging reports are as follows &#8211;<\/p>\n<ol class=\"custom-disc-list\">\n<li>Name of the customer<\/li>\n<li>Invoice date<\/li>\n<li>Amount of invoice<\/li>\n<li><a href=\"https:\/\/www.mooninvoice.com\/blog\/invoice-payment-terms\/\" target=\"_blank\" rel=\"noopener\">Payment terms<\/a><\/li>\n<li>Aging Buckets (based on how many days overdue the invoices are) Some aging buckets are as follows &#8211;<\/li>\n<\/ol>\n<ul class=\"custom-disc-list\">\n<li>0 to 30 days &#8211; invoices still within the agreed payment terms<\/li>\n<li>31 to 60 days &#8211; invoices that are 1 to 30 days overdue<\/li>\n<li>61 to 90 days &#8211; invoices that are overdue from 31 to 60 days<\/li>\n<li>91+ days &#8211; invoices overdue by more than 60 days<\/li>\n<\/ul>\n<h3>5. Bad Debt to Sales Ratio<\/h3>\n<p>This is another accounts receivable metric, crucial for business professionals. The bad debt to sales ratio analyzes bad debt in percentage form. Bad debts are very dangerous and your company should look for a solution to minimize them. So a company must observe and measure this metric.<\/p>\n<p><strong>Bad Debt to Sales Ratio Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>Uncollected Sales\/ Annual Sales x 100<\/strong>\n<\/div>\n<p>Suppose your company has annual total sales of $1,00,000 and uncollected sales of $50,000 then the bad debt to sales ratio is as follows &#8211;<\/p>\n<p>Bad Debt to Sales Ratio = $50,000 \/ $1,00,000 x 100<\/p>\n<p>Bad Debt to Sales Ratio = 50%<\/p>\n<p>A good bad debt to sales ratio is below 15% whereas if it is above 25%, it is considered to be poor.<\/p>\n<h3>6. Average Collection Period<\/h3>\n<p>The average collection period is a measure that indicates how long, on average, it takes a company to receive payment after making a sale. You might think it is similar to DSO, but it is not identical.<\/p>\n<p><strong>Average Collection Period Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>Average Collection Period = (Account Receivable \/ Annual Credit Sales) x 365<\/strong>\n<\/div>\n<p>Like DSO, an average collection period should also be low. It&#8217;s because a low average collection period indicates a quick cash recovery. Additionally, companies should also focus on sales while <a href=\"https:\/\/www.mooninvoice.com\/blog\/collect-payments\/\" target=\"_blank\" rel=\"noopener\">collecting payments<\/a> on time.<\/p>\n<p>Let&#8217;s take accounts receivable metrics example to understand it, suppose a company has following figures &#8211;<\/p>\n<ul class=\"custom-disc-list\">\n<li>Account receivable &#8211; $1,000<\/li>\n<li>Annual credit sales &#8211; $2,000<\/li>\n<\/ul>\n<p>Average collection period 1,000\/2,000 x 365 = 182.5<\/p>\n<h3>7. Accounts Receivable Turnover Ratio (ART)<\/h3>\n<p>This kind of AR metric indicates at what rate the Accounts Receivable department is collecting payments and converting it into cash. You can obtain the accounts receivable turnover (ART) ratio by dividing the net sales by the average accounts receivable.<\/p>\n<p><strong>Accounts Receivable Turnover Ratio Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>ART = Net Credit Sales\/ Average Accounts Receivable<\/strong>\n<\/div>\n<p>Average Accounts Receivable = Beginning Accounts Receivable + Ending Accounts Receivable\/2<\/p>\n<p>Suppose a company has following metrics &#8211;<\/p>\n<p>Net Credit Sales &#8211; $500,000<br \/>\nBeginning Accounts Receivable &#8211; $50,000<br \/>\nEnding Accounts Receivable &#8211; $110,000<\/p>\n<p>Average account receivable = $50,000 + $110,000 = $80,000<\/p>\n<p>ART = $500,000\/$80,000 = 6.25<\/p>\n<p>A high ART indicates good output. It means that if the ART rate is high, your company is rapidly getting on-time payments with no delay. If this is low, it indicates an unsatisfactory mark on collecting payments.<\/p>\n<div class=\"blog-cta-main blog-cta-tip\">\n  <strong><span class=\"cta-icon\">\ud83d\udca1<\/span>Read About:<\/strong><br \/>\n  <a href=\"https:\/\/www.mooninvoice.com\/blog\/net-credit-sales\/\">What Is Net Credit Sales<\/a>?\n<\/div>\n<h3>8. Percentage of Receivables Current<\/h3>\n<p>Percentage of receivable current shows the proportion of the company\u2019s accounts receivable that are within the standard payment terms and not past due. It shows whether the customers are paying on time or not.<\/p>\n<p><strong>Percentage of Receivables Current Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>Percentage of Receivables Current = Current Receivables\/ Total receivables x 100<\/strong>\n<\/div>\n<p><strong>Current Receivables<\/strong> &#8211; The amount which is still within the agreeable payment terms (within 30 days)<\/p>\n<p><strong>Total Receivables<\/strong> &#8211; The total amount of outstanding receivables (current + overdue)<\/p>\n<p>Suppose a company has following figures &#8211;<\/p>\n<p>Total receivables &#8211; $200,000<br \/>\nTotal current receivables &#8211; $150,000<\/p>\n<p>Then according to the formula &#8211;<\/p>\n<p>Percentage of Receivables Current = 150,000\/200,000 x 100<\/p>\n<p>= 75%<\/p>\n<p>A higher percentage is ideal because it indicates the majority of receivables are being paid on time.<\/p>\n<h3>9. Overdue Receivables as a Percentage of Total Receivables<\/h3>\n<p>This is another AR metric that measures the proportion of a company\u2019s accounts receivable that are overdue. One can evaluate the effectiveness of a company&#8217;s credit management through the percentage of overdue receivables to total receivables.<\/p>\n<p><strong>Overdue Receivables Percentage Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>Overdue Receivables Percentage = Overdue Receivables \/ Total Receivables x 100<\/strong>\n<\/div>\n<p>Overdue Receivables = Amount which is past due and not collected yet<\/p>\n<p>Total Receivables = Total outstanding accounts receivable that include current and overdue amounts.<\/p>\n<p>Suppose your company has following figures &#8211;<\/p>\n<ul class=\"custom-disc-list\">\n<li>Total accounts receivable &#8211; $100,000<\/li>\n<li>Total overdue receivables &#8211; $40,000<\/li>\n<\/ul>\n<p>Overdue receivables percentage will be &#8211; $40,000\/100,000 x 100 = 40%<\/p>\n<h3>10. Dispute Resolution Time<\/h3>\n<p>From the name itself, you can predict that it is a time related to a dispute. It is the time invested in resolving conflicts by companies. This metric is important for business because it compels professionals to reduce time as much as possible. This is because unsolved disputes delay payment.<\/p>\n<p>While reducing dispute resolution time, companies can refine their financial performance and maintain proper flow.<\/p>\n<p><strong>Dispute Resolution Time formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>Average Dispute Resolution Time &#8211; Total Time Spent on Disputes\/Total Number of Disputes Resolved<\/strong>\n<\/div>\n<p>Suppose you are running and managing a company that has the following metrics &#8211;<\/p>\n<p>Total time spent on disputes &#8211; 200 hours<br \/>\nTotal number of disputes resolved &#8211; 40<\/p>\n<p>Average dispute resolution time = 200 hours \/ 40 = 5 hours<\/p>\n<h3>11. First-Time Invoice Accuracy Rate<\/h3>\n<p>First-time invoice accuracy rate metric measures the percentage of invoices. It also reflects the accuracy and effectiveness of the company&#8217;s invoicing process. Also, it impacts customer satisfaction and the company\u2019s cash flow.<\/p>\n<p><strong>First-time Invoice Accuracy Rate Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>First-time Invoice Accuracy Rate = (Number of Correct Invoices on First Issue\/Total Number of Invoices Issued) x 100<\/strong>\n<\/div>\n<p>For example, suppose your company issues 300 invoices in a month. Out of it, 250 were accepted because there were no issues in those invoices. While on the other hand, 50 invoices were under dispute due to mistakes.<\/p>\n<p>So according to formula, the first time invoice accuracy rate is as follows &#8211;<\/p>\n<p>250\/300 x 100 = 83%<\/p>\n<p>A high accuracy rate is a good indicator so 83% is a good accuracy rate.<\/p>\n<h3>12. Cost of AR per Invoice<\/h3>\n<p>The cost of AR per invoice refers to the cost of processing and meaning of each invoice in a company. It includes all expenses from the initial step of creating an invoice to the last receiving the payment after dispatching the invoice. This metric is crucial for determining areas of improvement in the payment flow.<\/p>\n<p><strong>Cost of AR per Invoice Formula &#8211;<\/strong><\/p>\n<div class=\"formula-box formula-blue\">\n  <strong>Cost of AR per invoice = Total AR cost \/ Number of Invoices Processed<\/strong>\n<\/div>\n<p>Lets understand the cost of AR per invoice through the example &#8211;<\/p>\n<ul class=\"custom-disc-list\">\n<li>Labor cost &#8211; $6,000<\/li>\n<li>Technology cost (AR software) &#8211; $1,000<\/li>\n<li>Collection cost &#8211; $1,200<\/li>\n<li>Overhead cost &#8211; $200<\/li>\n<\/ul>\n<p>Total number of invoices processed &#8211; 100<\/p>\n<p>Cost of AR per invoice = $6,000+ $1,000 + $1,200 + $200 \/ 100<\/p>\n<p>= 84<\/p>\n<h3>13. Customer Satisfaction in Payment Experience<\/h3>\n<p>This measures how much customers are satisfied with the payment process for the goods and services they buy. So, when the customer is fully satisfied, it indicates there is a smooth and good payment process. On the other hand, there can be poor customer satisfaction if the payment process is long or getting unsuccess frequently.<\/p>\n<p>There are multiple ways to refine customer satisfaction. You can offer multiple payment options and provide easy-to-use and secure payment processes. Also, it&#8217;s important to consider invoices along with their accuracy and understandability.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Value_of_Accounts_Receivable_KPIs\"><\/span>Value of Accounts Receivable KPIs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Accounts Receivables KPIs are vital for companies&#8217; financial management. They help keep an eye on a company&#8217;s cash flow. With accurate data, it&#8217;s easy to determine the issues in the <a href=\"https:\/\/www.mooninvoice.com\/blog\/invoicing-process\/\" target=\"_blank\" rel=\"noopener\">invoicing process<\/a>. Apart from this, accounts receivable key performance indicators offer the following benefits.<\/p>\n<h3>Managing Credit Risk<\/h3>\n<p>Professionals can identify delayed payments through KPIs like Days Sales Outstanding (DSO). Hence, it&#8217;s easy for businesses to manage the credit risk.<\/p>\n<h3>Refine Collection Efficiency<\/h3>\n<p>The team can ensure that debts are effectively recovered through tracking of KPIs like the collection effectiveness index (CEI).<\/p>\n<h3>Profitability<\/h3>\n<p>It&#8217;s easy to maintain profitability by lowering DSO and maintaining higher collection rates. Businesses can ensure faster conversion of sales into cash.<\/p>\n<h3>Cash Flow Management<\/h3>\n<p>Payment delays are not good for any business. Regular analysis of accounts receivable KPIs is vitally important to maintain a proper cash flow. Ultimately, it helps in managing operational costs, employees&#8217; wages, and suppliers&#8217; on time payments.<\/p>\n<h3>Better Financial Prediction<\/h3>\n<p>Along with monitoring financial health, cash prediction for the future is easy with AR KPIs. This helps make better decisions on managing working capital, investment, and other financial management.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Our_Ending_Words\"><\/span>Our Ending Words<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Maintaining a proper cash flow for any business and accounts receivable KPIs and metrics are helpful in this process. With better insight, it is also useful for professionals to make better decisions through better financial forecasting. Effective management of KPIs ultimately results in improved financial health for the business.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div id=\"1-link-21123\" class=\"sh-link 1-link sh-hide\"><h3 onclick=\"showhide_toggle('1', 21123, 'How to Set KPI for Accounts Receivable?', 'How to Set KPI for Accounts Receivable?'); return false;\" aria-expanded=\"false\"><span id=\"1-toggle-21123\" class=\"sh-toggle\" data-more=\"How to Set KPI for Accounts Receivable?\" data-less=\"How to Set KPI for Accounts Receivable?\">How to Set KPI for Accounts Receivable?<\/span><\/h3><\/div><div id=\"1-content-21123\" class=\"sh-content 1-content sh-hide\" style=\"display: none;\">To set KPI for accounts receivable, one needs to choose metrics that offer insight into how effectively the business collects the payment. You can follow the below steps &#8211;<\/p>\n<ol class=\"custom-disc-list\">\n<li>Define the business goals<\/li>\n<li>Choosing the relevant KPIs<\/li>\n<li>Setting up realistic targets<\/li>\n<li>Monitor AR KPIs regularly<\/li>\n<li>Add the performance reviews<\/li>\n<\/ol>\n<p><\/div>\n<div id=\"2-link-21123\" class=\"sh-link 2-link sh-hide\"><h3 onclick=\"showhide_toggle('2', 21123, 'What Is the Process to Measure Accounts Receivable?', 'What Is the Process to Measure Accounts Receivable?'); return false;\" aria-expanded=\"false\"><span id=\"2-toggle-21123\" class=\"sh-toggle\" data-more=\"What Is the Process to Measure Accounts Receivable?\" data-less=\"What Is the Process to Measure Accounts Receivable?\">What Is the Process to Measure Accounts Receivable?<\/span><\/h3><\/div><div id=\"2-content-21123\" class=\"sh-content 2-content sh-hide\" style=\"display: none;\">Professionals can follow any process because there are numerous ways to measure accounts receivable. They can consider the AR to sales ratio, accounts receivable turnover ratio, and days sales outstanding. However, the choice of measuring depends on your objectives and the specific information you wish to obtain.<\/p>\n<p><\/div>\n<div id=\"3-link-21123\" class=\"sh-link 3-link sh-hide\"><h3 onclick=\"showhide_toggle('3', 21123, 'What Is an Ideal AR to AP Ratio?', 'What Is an Ideal AR to AP Ratio?'); return false;\" aria-expanded=\"false\"><span id=\"3-toggle-21123\" class=\"sh-toggle\" data-more=\"What Is an Ideal AR to AP Ratio?\" data-less=\"What Is an Ideal AR to AP Ratio?\">What Is an Ideal AR to AP Ratio?<\/span><\/h3><\/div><div id=\"3-content-21123\" class=\"sh-content 3-content sh-hide\" style=\"display: none;\">Usually, AR to AP ratio which is greater than 1:1 is considered to be good. Some other ratios are as follows &#8211;<\/p>\n<p>1:1 or lower &#8211; Not a good ratio as it indicates, business needs to take the loans if the income drops.<\/p>\n<p>2:1 &#8211; Business is healthy<\/p>\n<p>3:1 &#8211; It\u2019s an excellent ratio, indicating a business is earning three times as much as its investment.<\/p>\n<p><\/div>\n<div id=\"4-link-21123\" class=\"sh-link 4-link sh-hide\"><h3 onclick=\"showhide_toggle('4', 21123, 'What Is a Healthy Account Receivable?', 'What Is a Healthy Account Receivable?'); return false;\" aria-expanded=\"false\"><span id=\"4-toggle-21123\" class=\"sh-toggle\" data-more=\"What Is a Healthy Account Receivable?\" data-less=\"What Is a Healthy Account Receivable?\">What Is a Healthy Account Receivable?<\/span><\/h3><\/div><div id=\"4-content-21123\" class=\"sh-content 4-content sh-hide\" style=\"display: none;\">A healthy account receivable indicates the ability of a business to receive on-time payments and has minimum risk of bad debts. Some other characteristics of good accounts receivable are &#8211;<\/p>\n<ul class=\"custom-disc-list\">\n<li>Low days sales outstanding<\/li>\n<li>Favorable aging of accounts receivable<\/li>\n<li>High accounts receivable turnover ratio<\/li>\n<li>Strong cash collections effectiveness index<\/li>\n<li>Positive cash flow from receivables<\/li>\n<li>Cash collection policies<\/li>\n<\/ul>\n<p><\/div>\n<div id=\"5-link-21123\" class=\"sh-link 5-link sh-hide\"><h3 onclick=\"showhide_toggle('5', 21123, 'What Are the AR Aging Benchmarks?', 'What Are the AR Aging Benchmarks?'); return false;\" aria-expanded=\"false\"><span id=\"5-toggle-21123\" class=\"sh-toggle\" data-more=\"What Are the AR Aging Benchmarks?\" data-less=\"What Are the AR Aging Benchmarks?\">What Are the AR Aging Benchmarks?<\/span><\/h3><\/div><div id=\"5-content-21123\" class=\"sh-content 5-content sh-hide\" style=\"display: none;\">Account Receivable (AR) aging benchmarks help business professionals measure the health of their receivables by measuring how long customer invoices remain unpaid. Usually, there are aging buckets based on a 30-day increment. There are four time period categories in the standard AR aging.<\/p>\n<ul class=\"custom-disc-list\">\n<li>Current (0 to 30 days) &#8211; Invoices which are not past due<\/li>\n<li>31 to 60 days past due &#8211; Invoice which is overdue by 1 to 30 days<\/li>\n<li>61 to 90 days past due &#8211; invoice which is overdue by 31 to 60 days<\/li>\n<li>91+ days past due &#8211; invoice which is overdue by more than 60 days<\/li>\n<\/ul>\n<p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Table of Contents What Are Accounts Receivable KPIs?13 Accounts Receivable Metrics to ConsiderValue of Accounts Receivable KPIsOur Ending WordsFrequently Asked Questions What Are Accounts Receivable KPIs? Account receivable is money that the company pays for the offered service and product. However, this is unpaid money. In simple words, this is unpaid money due from the&hellip; <a class=\"more-link\" href=\"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/\">Continue reading <span class=\"screen-reader-text\">What Are Accounts Receivable Metrics? Define Their Types<\/span><\/a><\/p>\n","protected":false},"author":11,"featured_media":21130,"comment_status":"open","ping_status":"open","sticky":false,"template":"single-custom-post.php","format":"standard","meta":{"footnotes":""},"categories":[1380],"tags":[],"class_list":["post-21123","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-metrics","entry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v15.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Free Invoicing, Finance Tips &amp; Insights for Small Business<\/title>\n<meta name=\"description\" content=\"Get insights on invoicing, finance, and startup tips for small businesses, freelancers, and payment at Moon Invoice Blog.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Accounts Receivable KPI &amp; Metrics to Track Business Cash Flow\" \/>\n<meta property=\"og:description\" content=\"Learn about key accounts receivable metrics to track and improve your business\u2019s cash flow. 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