{"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":"2026-06-19T04:58:26","modified_gmt":"2026-06-19T04:58:26","slug":"accounts-receivable-metrics","status":"publish","type":"post","link":"https:\/\/www.mooninvoice.com\/blog\/accounts-receivable-metrics\/","title":{"rendered":"14 Key accounts receivable KPIs for better financial control"},"content":{"rendered":"

What are the accounts receivable metrics?<\/h2>\n

Accounts receivable metrics are KPIs that indicate the company\u2019s ability to manage invoices, credits, and payment collections. It means how efficiently and effectively your business collects customers’ payments and manages outstanding revenue.<\/p>\n

Accounts receivable turnover ratio, days sales outstanding (DSO), collection effectiveness index (CEI), and bad debt ratio (BDR) are some common AR metrics. Monitoring these KPIs helps business professionals make informed decisions about collecting payments and improving overall financial performance.<\/p>\n

Noteworthy fact<\/strong>
\nAccording to a Deloitte report<\/a>, a survey indicates that about 54% of CFOs say integrating AI agents into finance will be one of their top priorities in 2026 or in the coming time as part of finance transformation.<\/div>\n

Overview of accounts receivable metrics KPIs<\/h2>\n

Get a quick overview of important AR metrics, including their formulas and ideal benchmarks.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
S.No.<\/b><\/th>\nKPI<\/b><\/th>\nFormula<\/b><\/th>\nIdeal range<\/b><\/th>\n<\/tr>\n<\/thead>\n
1<\/td>\nExpected cash collection<\/td>\nExpected cash collection = Cash sales + Projected AR collection<\/td>\n95% to 99%<\/td>\n<\/tr>\n
2<\/td>\nAR turnover ratio<\/td>\nAccounts receivable turnover ratio = Net credit sales \u00f7 Average accounts receivable<\/td>\n5 to 8<\/td>\n<\/tr>\n
3<\/td>\nDays sales outstanding (DSO)<\/td>\nDSO = (Accounts receivable \u00f7 Total credit sales) x No. of days<\/td>\n35 to 45 days<\/td>\n<\/tr>\n
4<\/td>\nAverage collection period<\/td>\nAverage collection period = (Accounts receivable \u00f7 Annual credit sales) x 365<\/td>\n30 to 45 days<\/td>\n<\/tr>\n
5<\/td>\nCollection effectiveness index (CEI)<\/td>\nCEI = ((Beginning AR + Credit sales – Ending total AR) \u00f7 (Beginning AR + Credit sales – Ending current AR)) x 100<\/td>\n80% to 90%<\/td>\n<\/tr>\n
6<\/td>\nAverage days delinquent (ADD)<\/td>\nADD = DSO – Best possible DSO<\/td>\nunder 15 to 20 days<\/td>\n<\/tr>\n
7<\/td>\nBad debt ratio<\/td>\nBad debt ratio = (Amount of bad debt \u00f7 Total sales) x 100<\/td>\n1% to 2%<\/td>\n<\/tr>\n
8<\/td>\nPercentage of high-risk accounts<\/td>\nPercentage of high-risk accounts = (No. of high-risk accounts \u00f7 Total no. of accounts) x 100<\/td>\n0% to 10%<\/td>\n<\/tr>\n
9<\/td>\nNumber of revisions to invoices<\/td>\nInvoice revision rate = (Total no. of revised invoices \u00f7 Total no. of issued invoices x 100)<\/td>\n0% to 5%<\/td>\n<\/tr>\n
10<\/td>\nPromise to pay the conversion rate<\/td>\nPromise to pay the conversion rate = (No. of kept payment promises) \u00f7 (Total no. of payment promises made) x 100<\/td>\n70% to 95%<\/td>\n<\/tr>\n
11<\/td>\nStaff productivity<\/td>\nStaff productivity = Total AR tasks completed \u00f7 No. of AR staff members<\/td>\n30 to 60 invoices per day per employee<\/td>\n<\/tr>\n
12<\/td>\nCustomer satisfaction score<\/td>\nCustomer satisfaction score = (No. of satisfied customers \u00f7 Total no. of survey responses) x 100<\/td>\n70% to 100%<\/td>\n<\/tr>\n
13<\/td>\nInvoice dispute percentage<\/td>\nInvoice dispute percentage = (No. of the disputed invoice \u00f7 Total invoices issued) x 100<\/td>\n1% to 5%<\/td>\n<\/tr>\n
14<\/td>\nCredit onboarding timeline<\/td>\nCredit onboarding timeline = Total time taken to onboard new credit customers \u00f7 No. of credit customers onboarded<\/td>\n1 to 7 days<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Top 14 accounts receivable metrics to track for your business finance<\/h2>\n

\"AR<\/p>\n

1. Expected cash collection<\/h3>\n

This refers to the estimated amount of cash that your company can receive from the outstanding invoices and sales for the period. Therefore, the finance team can forecast the cash flow<\/a> and plan their budget accordingly.<\/p>\n

There are two primary sources of expected cash collection:<\/strong><\/p>\n

    \n
  1. Cash sales – Cash received immediately upon payment by the customer for the sale.<\/li>\n
  2. Accounts receivable collections – The expected amount of payment that the customer pays as credits.<\/li>\n<\/ol>\n

    Expected cash collection formula<\/h4>\n
    Expected cash collection = Cash sales + Projected AR collection<\/strong><\/div>\n
    <\/div>\n

    Example<\/h4>\n

    Let’s say your company makes the sale, receives $4,000 in payment, and has an outstanding invoice for $6,000. You assume that your customer will pay in credits for these invoices. The expected cash collection will be as follows:<\/p>\n

    Expected cash collection = $4,000 + $6,000 = $10,000<\/p>\n

    2. AR turnover ratio<\/h3>\n

    The accounts receivable turnover ratio indicates your company\u2019s ability to collect payments<\/a>. The average number of collections can be calculated weekly, monthly, or quarterly. A higher AR turnover ratio is a good sign, indicating rapid payment collection.<\/p>\n

    AR turnover ratio formula<\/h4>\n
    Accounts receivable turnover ratio = Net credit sales \u00f7 Average accounts receivable<\/strong><\/div>\n
    <\/div>\n

    Here,<\/p>\n

    Net credit sales = Sales on credit – Return and sales allowances<\/strong><\/div>\n
    <\/div>\n
    Average accounts receivable = (Starting receivables + Ending receivables) \u00f7 2<\/strong><\/div>\n
    <\/div>\n

    Example<\/h4>\n

    Suppose a company makes the net credit sales<\/a> of $50,000, and its average accounts receivable is $3,000. Calculating AR turnover ratio as per the formula –<\/p>\n

    Accounts receivable turnover ratio = $50,000 \u00f7 $3,000 = 16.6<\/p>\n

    3. Days sales outstanding (DSO)<\/h3>\n

    Days’ sales outstanding refers to the average number of days the company takes to collect payment. It means a higher DSO indicates a longer time to receive payment and collection challenges, and a lower DSO indicates a shorter time. Therefore, you must aim to maintain DSO as low as possible.<\/p>\n

    DSO Formula<\/h4>\n
    DSO = (Accounts receivable \u00f7 Total credit sales) x Number of days<\/strong><\/div>\n
    <\/div>\n

    Example<\/h4>\n

    Suppose a company possesses the following metrics<\/p>\n