CEI
Also known as collection effectiveness index, collection effectiveness
CEI (Collection Effectiveness Index) measures how much of what could actually be collected in a period you in fact brought in.
- Measures
- Effectiveness, not speed
- Scale
- 0 to 100
- Counterpart to
- DSO
In practice
DSO tells you how long it takes for the money to arrive. CEI tells you something else: what share of everything that could have been collected you actually collected. The calculation sets the period’s total collectable amount — opening balance plus credit sales for the period — against what is still outstanding at the end, adjusted for anything not yet due.
The difference matters because the two figures can point in opposite directions. A company with 60-day terms necessarily has a high DSO, yet can have a CEI close to a hundred because everything is paid on time. Conversely, a low DSO can hide the fact that a quarter of the portfolio never comes home at all.
That is why CEI is the figure that says something about the work. DSO mostly says something about the terms.
Where it commonly goes wrong
- Using CEI as a replacement for DSO. They do not measure the same thing. Use only one and you are missing either the speed or the effectiveness.
- Counting items not yet due as outstanding. The calculation then penalises a company for having sold something last week.