Every AR team tracks DSO. It's the headline number that executives ask about and boards review quarterly. But if DSO is your only AR metric, you're flying blind. DSO tells you where you are—not how you got there, where you're headed, or what to do about it.
The most effective AR teams track a portfolio of metrics that together paint a complete picture of collection health. These metrics help them spot problems before they become crises, allocate resources effectively, and demonstrate the value their team creates.
The Problem with DSO Alone
DSO (Days Sales Outstanding) measures the average number of days it takes to collect payment after a sale. It's calculated as (Accounts Receivable / Total Credit Sales) × Number of Days. Simple, standardized, and universally understood.
But DSO has significant limitations:
- It's a lagging indicator. By the time DSO rises, the damage is done. You're measuring yesterday's problems.
- It's easily distorted. A few large invoices can swing DSO dramatically, masking underlying trends.
- It doesn't explain causation. DSO tells you collections are slow, not why they're slow or what to fix.
- It ignores team performance. The same DSO could result from a stellar team fighting tough conditions or a weak team in an easy environment.
The Metrics That Actually Predict Success
1. Collection Effectiveness Index (CEI)
CEI measures what percentage of receivables you actually collected during a period, compared to what was available to collect. Unlike DSO, CEI directly measures your team's effectiveness.
CEI Formula
CEI = (Beginning AR + Credit Sales - Ending AR) / (Beginning AR + Credit Sales - Current AR) × 100
Target: 80%+ is good, 90%+ is excellent. Below 70% signals significant collection problems.
CEI is valuable because it separates collection performance from sales timing. You can have a "bad" DSO because sales spiked late in the period, but a good CEI because you're collecting effectively on what's due.
2. Aging Bucket Distribution
Rather than a single number, track what percentage of your AR sits in each aging bucket: Current, 1-30, 31-60, 61-90, and 90+. The distribution matters more than any single figure.
Healthy vs. Unhealthy Distribution
Healthy Distribution
- • Current: 70-80%
- • 1-30: 12-18%
- • 31-60: 4-7%
- • 61-90: 2-3%
- • 90+: 1-2%
Warning Signs
- • 90+ growing faster than total AR
- • Current below 60%
- • 31-60 bucket ballooning
- • Month-over-month shifts toward older buckets
Track this distribution over time. The trend matters more than any single snapshot. A gradual shift toward older buckets is often the first warning sign of collection problems—long before DSO spikes.
3. Touch Rate (Contact Rate)
Touch rate measures what percentage of past-due accounts your team actually contacted during a period. It's a leading indicator of collection success—accounts that get touched get paid faster.
Touch Rate Formula
Touch Rate = (Accounts Contacted / Total Past-Due Accounts) × 100
Target: 60%+ monthly. Top performers hit 75%+. Below 40% means accounts are aging without intervention.
Low touch rates usually indicate one of three problems: too many accounts per collector, too much time spent on non-collection tasks, or poor prioritization (working easy accounts instead of important ones).
4. Promise-to-Pay Rate and Broken Promise Rate
When collectors contact customers, how often do they secure a promise to pay? And how often are those promises kept? These metrics reveal both collector effectiveness and customer reliability.
Promise-to-Pay Rate
Percentage of contacts that result in a payment commitment.
Target: 40-60%. Lower rates may indicate ineffective collection conversations or reaching wrong contacts.
Broken Promise Rate
Percentage of promises that aren't kept.
Target: Below 20%. High broken promise rates signal customer cash problems or that promises are being made to end calls, not to actually pay.
5. Dispute Rate and Resolution Time
Disputes are the hidden killer of AR performance. Track what percentage of AR is tied up in disputes and how long disputes take to resolve.
Dispute Metrics to Track
- Dispute Rate: Percentage of invoices with active disputes. Target: below 5%.
- Dispute Dollars: Total dollars tied up in disputes. Track trend over time.
- Average Resolution Time: Days from dispute raised to resolved. Target: under 15 days.
- Dispute Win Rate: Percentage resolved in your favor. Reveals whether disputes are legitimate or tactical.
6. Bad Debt Rate and Recovery Rate
Bad debt rate measures write-offs as a percentage of revenue. Recovery rate measures what percentage of bad debt you eventually recover. Together, they show the ultimate outcome of your collection efforts.
Industry Benchmarks
Bad Debt Rate by Industry
- • Construction: 1.5-3%
- • Manufacturing: 0.5-1.5%
- • Distribution: 0.3-1%
- • Professional Services: 1-2%
- • Staffing: 0.5-1.5%
Recovery Rate Targets
- • Internal recovery: 20-40%
- • Third-party collections: 15-25%
- • Legal action: varies widely
Collector Productivity Metrics
Beyond portfolio metrics, track how effectively your team is working:
Dollars Collected per Collector
Total dollars collected divided by number of collectors. Useful for benchmarking and capacity planning. Typical range: $200K-$500K monthly per FTE, depending on average invoice size.
Accounts per Collector
How many accounts each collector is responsible for. Too many = insufficient attention to each account. Too few = underutilization. Sweet spot: 200-400 accounts per collector for most B2B environments.
Activities per Day
Calls, emails, and other outreach activities per collector per day. Reveals time allocation and effort levels. Target: 40-60 meaningful activities per day.
Building a Metrics Dashboard
Don't try to track everything. Start with a core dashboard of 5-7 metrics that give you visibility into collection health:
Recommended Core Dashboard
Portfolio Health
- 1. DSO (trend over 6+ months)
- 2. CEI (monthly)
- 3. Aging distribution (weekly)
Team Performance
- 4. Touch rate (weekly)
- 5. Dispute resolution time (monthly)
- 6. Dollars collected per collector (monthly)
Review the dashboard weekly with your team and monthly with leadership. The goal isn't to hit perfect numbers—it's to understand trends, identify problems early, and continuously improve.
Using Metrics to Drive Action
Metrics are only valuable if they drive better decisions. Here's how to use each metric type:
Key Takeaways
- DSO alone doesn't tell you enough—build a portfolio of metrics
- CEI and touch rate are better indicators of team effectiveness than DSO
- Track trends over time, not just point-in-time snapshots
- Use metrics to diagnose problems and drive specific actions