The top KPIs for Credit and Collections are critical for monitoring the efficiency and effectiveness of a company's credit management and its ability to recover outstanding debts. They enable corporate finance teams to assess the risk profile of their receivables, track the timeliness of customer payments, and identify any issues in the credit control process.
By analyzing key metrics such as Days Sales Outstanding (DSO), aging schedules, and collection effectiveness index, companies can improve cash flow management, minimize bad debt write-offs, and optimize working capital.
This article showcases the Most Critical 12 KPIs for Credit and Collections and Associated Benchmarks.
Days Sales Outstanding (DSO) gauges how quickly billed revenue converts into cash, acting as an early barometer of liquidity risk.
A rising DSO often foreshadows tighter working-capital headroom that forces managers to tap costly credit lines. Top-quartile companies compress DSO by embedding real-time analytics in their order-to-cash workflow, cutting financing costs by up to 30% (PwC).
Sustained improvement here frees cash for growth initiatives without diluting shareholders. Learn more about the Days Sales Outstanding (DSO) KPI.
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We have 4 benchmarks for this KPI available in our database.
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Collection Effectiveness Index (CEI) measures how efficiently a company collects its receivables, directly influencing cash flow and liquidity.
A higher CEI indicates effective credit management and operational efficiency, while a lower CEI can signal potential cash flow issues. This KPI is crucial for maintaining financial health and ensuring that resources are available for growth initiatives.
Companies with strong CEI performance often see improved ROI metrics and can better align their strategic objectives with operational capabilities. Learn more about the Collection Effectiveness Index (CEI) KPI.
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We have 3 benchmarks for this KPI available in our database.
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Bad Debt Percentage is a critical financial ratio that reflects the proportion of receivables that are unlikely to be collected.
High percentages can strain cash flow, hinder operational efficiency, and signal poor credit management. Conversely, low percentages indicate effective credit policies and robust collections processes.
This KPI influences overall financial health, impacting strategic alignment and forecasting accuracy. Learn more about the Bad Debt Percentage KPI.
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We have 4 benchmarks for this KPI available in our database.
Accounts Receivable Turnover Ratio (ART) is a critical metric for assessing how efficiently a company collects cash from its credit sales.
High turnover indicates effective credit management and operational efficiency, while low turnover may signal potential cash flow issues. This KPI directly influences liquidity, working capital management, and overall financial health.
By tracking ART, organizations can make data-driven decisions that enhance forecasting accuracy and improve cash flow. Learn more about the Accounts Receivable Turnover Ratio KPI.
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We have 1 benchmark for this KPI available in our database.
Cash Conversion Cycle (CCC) measures how efficiently a company converts its investments in inventory and receivables into cash flow from sales.
A shorter CCC indicates better operational efficiency, allowing businesses to reinvest cash more quickly into growth initiatives. This KPI influences liquidity management, working capital optimization, and overall financial health.
Companies with a streamlined CCC can improve forecasting accuracy and enhance their ROI metrics. Learn more about the Cash Conversion Cycle (CCC) KPI.
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We have 5 benchmarks for this KPI available in our database.
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Average Days Delinquent (ADD) serves as a crucial financial ratio that highlights the efficiency of a company's collections process.
It directly influences cash flow, working capital management, and overall financial health. A lower ADD indicates effective credit management and operational efficiency, while a higher ADD can signal potential liquidity issues.
Organizations that actively track this KPI can make data-driven decisions to enhance forecasting accuracy and improve cash flow. Learn more about the Average Days Delinquent (ADD) KPI.
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We have 4 benchmarks for this KPI available in our database.
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Percent of Total Receivables Over 90 Days is a critical performance indicator that reflects financial health and operational efficiency.
High values can indicate cash flow issues, while low values suggest effective credit management and collections processes. This KPI directly influences working capital management and liquidity, impacting overall business outcomes.
Companies that maintain a low percentage can reinvest cash more quickly, enhancing growth opportunities. Learn more about the Percent of Total Receivables Over 90 Days KPI.
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We have 3 benchmarks for this KPI available in our database.
Recovery Rate on Bad Debts is a critical KPI that measures the effectiveness of a company's collections process.
It directly influences cash flow, operational efficiency, and overall financial health. A higher recovery rate indicates robust credit management and effective collection strategies, which can significantly improve a company's liquidity.
Conversely, a low recovery rate may signal inefficiencies or poor customer creditworthiness, leading to increased bad debts. Learn more about the Recovery Rate on Bad Debts KPI.
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We have 10 benchmarks for this KPI available in our database.
Write-off Amount is a critical KPI that directly influences financial health and operational efficiency.
It serves as a leading indicator of credit risk and cash flow management. High write-off amounts can signal ineffective credit policies and poor customer selection, leading to significant business outcomes such as reduced profitability and strained cash reserves.
Conversely, low write-off amounts reflect strong credit controls and effective collections strategies. Learn more about the Write-off Amount KPI.
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We have 5 benchmarks for this KPI available in our database.
Aging Report is crucial for assessing the efficiency of accounts receivable management.
It directly influences cash flow, liquidity, and overall financial health. By tracking overdue invoices, organizations can identify potential cash shortages before they impact operations.
This KPI serves as a leading indicator of operational efficiency and helps align financial strategies with business outcomes. Learn more about the Aging Report KPI.
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We have 3 benchmarks for this KPI available in our database.
Credit Risk Exposure is a critical KPI that quantifies potential losses from credit defaults, directly impacting financial health and operational efficiency.
High exposure can lead to increased borrowing costs and liquidity challenges, while low exposure often indicates effective risk management. This metric influences business outcomes such as cash flow stability and profitability.
Companies that actively manage their credit risk exposure can enhance their ROI metric and improve forecasting accuracy. Learn more about the Credit Risk Exposure KPI.
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We have 5 benchmarks for this KPI available in our database.
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Credit Limit Compliance is crucial for maintaining financial health and operational efficiency.
It directly influences cash flow management and risk mitigation, ensuring that businesses do not overextend credit to customers. A high compliance rate indicates effective credit policies, while low rates can signal potential liquidity issues.
Companies that excel in this KPI often see improved ROI metrics and stronger strategic alignment across departments. Learn more about the Credit Limit Compliance KPI.
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We have 2 benchmarks for this KPI available in our database.
These 12 Credit and Collections KPIs were selected to provide a comprehensive view of receivables management, balancing operational efficiency and financial risk. They span leading indicators like Credit Limit Compliance and Credit Risk Exposure, alongside lagging metrics such as Bad Debt Percentage and Write-off Amount. This set covers the full collections funnel from credit risk assessment through cash recovery, enabling holistic performance evaluation for the Credit and Collections group.
Monitor Days Sales Outstanding (DSO) in conjunction with Collection Effectiveness Index (CEI)—a rising DSO with a declining CEI signals deteriorating collection efficiency. Track Percent of Total Receivables Over 90 Days alongside Average Days Delinquent (ADD); divergence here indicates aging receivables are not being resolved timely, increasing credit risk exposure. Cash Conversion Cycle (CCC) integrates DSO with inventory and payables metrics, linking collections performance to overall working capital health and highlighting bottlenecks in cash flow.
Prioritize implementing Days Sales Outstanding, Collection Effectiveness Index, and Bad Debt Percentage first. These KPIs require readily available data and deliver immediate insights into collection velocity, effectiveness, and credit losses. Once established, layer in Percent of Total Receivables Over 90 Days and Credit Limit Compliance to refine risk controls. The full Credit and Collections KPI set, with formulas and benchmarks, is accessible in the KPI Depot database.
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