11 Essential Accounts Receivable KPIs You Can't Ignore

Want to improve your cash flow? Discover the 11 essential accounts receivable KPIs you can't ignore to boost your financial health.
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You might prefer selling products or services on credit sales. 

The good part: Attracts and delights customers with deferred payment. 

The bad part: Risks business by delayed payments and bad debts. 

Typically, SaaS companies rely on subscription models and consistent revenue, which are essential for continuous developmental updates. However, the average Accounts Receivable Turnover (ART) ratio for SaaS companies is 5.2, while a healthy ratio is 7.8.

That’s why, for a healthy SaaS business, tracking AR collections with solid data and KPIs is necessary.

More importantly, this blog will also cover how to use the KPIs.

Let's start! 

What are Accounts Receivable KPIs?

Accounts Receivable Key Performance Indicators (AR KPIs) are tools that measure the efficiency of the accounts receivable process. 

They’re like a speedometer, telling how quickly a company collects cash from customers and maintains healthy cash flow.

They track:

  • How long it takes customers to pay their bills
  • Problem areas with customer payments
  • Collection efforts effectiveness 

Accounts Receivable KPI Examples

Let’s take a look at some key AR examples. We’ve broadly divided them into three parts: efficiency KPIs, risk assessment KPIs, and customer experience KPIs.

Efficiency KPIs:

  • AR Turnover Ratio: Measures how quickly receivables are collected.
  • Days Sales Outstanding (DSO): Average days to collect payment after a sale.
  • Days Deductions Outstanding (DDO): Average time to resolve invoice disputes.
  • Right Party Contacted Rate: Percentage of successful contacts with payment decision-makers.
  • Cost per Collection: Costs spent on collection actions.

Risk Assessment KPIs:

  • Percentage of High-Risk Accounts: Proportion of accounts with higher payment risk.
  • Average Days Delinquent: Average days overdue for delinquent accounts.
  • Bad Debts to Sales Ratio: Proportion of sales resulting in bad debts.

Customer Experience KPIs:

  • Collection Effectiveness Index (CEI): Measures success in collecting outstanding payments.
  • Customer Satisfaction: Satisfaction with invoicing and payment processes.
  • Number of Revised Invoices: Frequency of invoices needing corrections or reissuance.

Why measure the efficiency of your AR process?

Even while you thrive in sales, slow payment can leave your company cash-starved and cripple your growth. 

Because of a lack of funds, you might miss opportunities, delay hiring that talented developer, or postpone that marketing campaign! 

An efficient AR process means a roadmap to get faster payment and more working capital, which will keep your business running and propel it forward.

What is the importance of accounts receivable KPIs

Measuring accounts receivable is necessary because of two big reasons: faster payments and healthier finances.

As invoices age, their likelihood of becoming uncollectible increases:

  • 3 months old: 26% chance of not being paid
  • 6 months old: Risk jumps to 70%
  • 1-year-old: A shocking 90% chance you won't see that money


Monitoring KPIs for accounts receivable helps— 

  • Better Cash Flow

By monitoring days sales outstanding (one of AR KPIs), you can understand how quickly customers are paying. After analyzing multiple factors, your AR team can speed up cash inflows.

  • Evaluating Team Performance

By tracking collections team KPIs, you can identify areas for coaching and improvement, improving overall team and department performance.   

  • Minimizing Bad Debt

By knowing the average days delinquent, you can intervene early with customers who are falling behind, increasing the chances of full payment and reducing write-offs.

  • Optimizing Credit Decisions

Via bad debt-to-sales ratio, you can make informed credit term decisions, balancing customer satisfaction and financial risk.

How do you set KPI for accounts receivable?

A survey highlighted the key KPIs leaders choose to assess AR performance:


 We can see that day sales outstanding, staff productivity, and collective effectiveness index rank at the top three. 

However, we think the focus should be on overall effectiveness, not on a single or two metrics—reducing late payments and invoice disputes. The special focus should be on accurate data input and setting realistic targets based on industry. 

11 top AR KPIs you should be tracking

Account receivable KPIs can vary by business, but these 11 metrics are proven to be valuable for clean and strategic insights.

1. AR turnover ratio

The AR turnover ratio KPI measures how good your company is at collecting. 

A high turnover rate indicates prompt collection of payments, while a low turnover rate points towards delayed collections.


ART ratio = Net Credit Sales / Average Accounts Receivable

Let’s say your company's annual credit sales are $5 million, with an average AR balance of $750,000.  

By using the formula, the ratio comes out to be 6.67 (5,000,000 / 750,000).  

This means it takes your customers approximately 55 days to pay you on average (365 days / 6.67).

2. Days sales outstanding (DSO)

Days Sales Outstanding (DSO) measures how long it takes a company to receive payments after making a credit sale. 

A low DSO indicates efficient collections and cash flow, which in turn reflects good credit management and customer satisfaction.


DSO = (Accounts Receivable / Net Credit Sales) × Number of Days 

Suppose, for a company (April-June): 

  1. Q2 net credit sales: $120,000
  2. Q2 accounts receivable: $70,000

DSO: ($70,000 ÷ $120,000) × 90 days = 56.25 days 

Lower DSO is generally better (around 45 days), but industry standards also depend. 

3. Collection effectiveness index (CEI)

The Collections Effectiveness Index (CEI) tracks how efficiently you collect payments. 

It focuses on reducing uncollectible receivables, unlike Days Sales Outstanding (DSO), which looks at collection speed.


CEI = [Beginning AR Balance – Ending Total AR Balance] ÷ [Beginning AR Balance – Ending Current AR Balance] x 100

Let’s look at an example— 

Say your AR team has gathered the following information:

  • Beginning AR balance: $150,000
  • Monthly credit sales: $25,000
  • Ending total AR balance: $80,000
  • Ending current AR balance: $20,000

Using the formula, the CEI comes to be 61.29% [($150,000 + $25,000) - $80,000] ÷ [($150,000 + $25,000) - $20,000] × 100.

Ideally, a CEI of 80% is considered good, while lower percentages suggest areas for improvement.

4. Percentage of high-risk accounts

The percentage of high-risk accounts helps pinpoint customers who are more prone to delaying payments or defaulting.

This helps collectors focus on the right areas to minimize possible losses.

To calculate it:

  • Define what "high-risk" means for you
  • Assess factors like average collection periods compared to industry standards
  • Conduct regular customer credit assessments
  • Monitor aging reports for deteriorating payment trends
  • Evaluate non-invoice-related costs associated with customers


Percentage of high-risk accounts = (High-Risk Customers / Total Customer) x 100

Tracking this KPI is important for improving collections, managing bad debt, and eventually improving customer relations by proactively addressing payment issues.‏‏‎ ‎‏‏‎ ‎

5. Customer satisfaction

Customer satisfaction metrics tell how well your offerings (products, services) meet customer expectations. However, in terms of accounts receivable, it’s about how easy and convenient it is for customers to pay bills.

There are two ways to calculate customer satisfaction— CSAT and NPS. 

However, AR departments need to gauge customer satisfaction solely based on the billing and payment experience. 

To measure customer satisfaction in AR, you have to use criteria like:

  • Self-service options (payment portals, document access)
  • Quality of AR team communication (dispute resolution)
  • Transparent account status
  • Flexible invoice delivery and payment methods

6. Average days delinquent (ADD)

Average Days Delinquent (ADD) tracks how long it takes customers to pay your invoices. A higher ADD means customers are slower to pay and vice versa. 



And, you can calculate Best Possible DSO (BPDSO) = (Current Accounts Receivable / Net Credit Sales) x Number of Days

Say your sales are $50,000 over two months (60 days), and your accounts receivable is $30,000. Your DSO would be 36 days (30,000 / 50,000 x 60). If your current receivables are $10,000, your BPDSO is 12 days (10,000 / 50,000 x 60). 

This means your ADD will be 24 days (36 DSO - 12 BPDSO).

7. Bad Debt to Sales ratio

Bad debt, also called uncollectible accounts expense, refers to money owed to a business by a customer (the debtor) that is unlikely to be repaid.

When selling on credit, businesses anticipate some unpaid debts, and later record it as an expense in their financial statements. 


Bad debt to sales ratio = (Actual Uncollectible Debts / Sales Per Period) x 100

An example— 

If your company has a total bad debt of $15,000 and a total sales of $120,000, your bad debt-to-sales ratio would be 12.5%.

A good bad debt-to-sales ratio is generally below 15%, while a poor one is anything above 25%.

8. Right party contacted (RPC) rate

The Right Party Contact (RPC) rate measures the percentage of successful contact attempts (emails, calls, SMS) made to valid contacts responsible for payment. 

A high RPC rate indicates effective communication with the right individuals, improving the collections process and vice versa. 


RPC rate = (Total Number of Contact Attempts/Number of Successful Right Party Contacts​) × 100

Say, you made 200 contact attempts and successfully reached the right party 50 times, the RPC rate would be:

RPC rate = (50/200) × 100 = 25%

This means that 25% of your contact attempts were successful in reaching the right party.

9. Operational cost per collection

The metrics track how much you spend to collect each customer payment. This includes,

  • employee salaries, 
  • postage, 
  • And anything else involved in getting paid

Ideally, the cost per collection metric should be minimized to avoid losing more money on collections.

One effective way is to invest in automation.

Automation can enhance accounts receivable performance metrics and lower collection costs by streamlining tasks like payment reminders, customer statements, and payment confirmations. 

10. Days deduction outstanding (DDO)

Days Deduction Outstanding (DDO) measures how long invoice disputes affect accounts receivable. Higher DDO signals prolonged resolution, impacting cash flow and costs. 

A lower DDO shows costs related to payment collections are under control and vice versa. 


DDO = Average Daily Deductions / Average Value of Deductions Per Day

Let's say your average daily deductions come in at $100,000, and your average daily collections are $5,000.

DDO = $100,000 / $5,000 DDO = 20 days

In this scenario, it would take an average of 20 days to resolve your outstanding deductions.

11. Number of revised invoices

Having to fix invoices constantly is not a good sign. 

The causes can be typos or mistakes or because something needs to be changed (like new payment terms).

To gauge the impact of revised invoices on your operations, don't just tally up corrections. 

You should also look at:

  • The time your team spent sorting out disputes that led to revised invoices
  • The time to create and send out those revised invoices

These things add up beyond the initial mistake, like extra labor costs, productivity dips, and slower payments, pointing towards broader invoicing issues such as frequent manual errors.

That's where bringing in some automation can help.

‏‏‎How can AR automation improve your KPIs?

Managing accounts receivables can be tedious, especially if you rely on manual data collection and spreadsheets. This can hinder gaining valuable insights from AR metrics.

Automating streamlines data collection and aggregation — freeing up your accounting team to focus on the "why" behind the numbers and identify areas for improvement.

With Zenskar: 

  • Get fastly paid in days, not weeks
  • Eliminate errors and typos with automation
  • Manage debt and collection effortlessly

Book a demo and get started right away!

Frequently asked questions

1. How can you improve AR collection?

Here are a few ways you can do so —-

  • Real-time data: Give your team a clear view of outstanding payments.
  • Simplify Payments: Make it easy for customers to pay you.
  • Reward & Penalize: Offer early payment discounts and late payment fees.

2. What are some typical difficulties businesses encounter when tracking AR KPIs?

Tracking accounts receivable KPIs can be tricky due to manual errors, lack of industry benchmarks, and difficulty connecting them to other financial data. This makes it hard to take action based on AR data.

3. What are the recommended ways to analyze AR KPIs?

You can analyse AR KPIs by focusing on the following-

  • Tracking right KPIs: Focusing on accurate data and a few key metrics.
  • Optimising AR process: Automating invoicing and collections, and prioritising efforts.
  • Improving customer experience: Simplifying payments, offering early payment discounts, and following up promptly on overdue invoices.
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