The Ultimate Guide to Tracking Your Accounts Receivable KPIs

If you want to know what's really going on in your business, you have to look at your data.

The same principle applies to your accounts receivable collection: to understand your performance, you need to track specific metrics.

Knowing where you stand will help you focus your team's efforts effectively. In the long run, tracking your AR metrics will help optimize your collections process (with tangible proof of improvement). Most importantly, it ensures optimal cash flow management.

Here are the essential KPIs you should be tracking:

• Collection Effectiveness Index (CEI)
• Best possible DSO
• Average Days Delinquent (ADD)
• Accounts receivable turnover ratio
• Days Sales Outstanding (Having trouble calculating it? Check out our free spreadsheet!)

Learn more about the 5 Key Accounts Receivable Metrics to Assess Your AR Performance

Today, let's focus on how best to track these key performance indicators. With multiple metrics to track and various calculation methods for each, it can get overwhelming - especially if you're doing it manually.

Keep reading to discover the best way to track your accounts receivable KPIs!

Spoiler alert: the best way involves using an automated solution like ÉquiSettle, our comprehensive AR management platform. Try out our platform for free!

The Problem with Manual AR KPI Tracking (Or Why Spreadsheets Aren't Enough)

Before we explore the optimal way to track your accounts receivable metrics, let's examine the limitations of traditional methods, starting with spreadsheets.

Spreadsheets Produce Inaccurate Results

While CFOs and finance teams commonly use spreadsheets, they're not always the best option. When it comes to tracking KPIs, Excel can lead to inaccurate results.

The human factor introduces risk - typos in tables or formulas are common. Sometimes these errors are obvious and require time to find. Sometimes they're subtle, leading to decisions based on false information.

To calculate your metrics, you need relevant data. For CEI measures, you'll need:

• Beginning receivables
• Monthly sales
• Total receivables at period end
• Current receivables

That's significant data to track, especially when it's constantly changing!

Switching between different software dashboards, bank accounts, and tabs doesn't simplify the process. There's no guarantee the data is current, either. For up-to-date results, you need real-time data - something spreadsheets don't provide.

Manual Tracking Wastes Valuable Time

Even if you manage to gather accurate data, using spreadsheets isn't time-efficient.

After the data collection (which is ongoing), you still need to compute everything manually. Comparing different time periods means starting over. Creating graphs or reports takes additional time.

Benchmarking all your performance metrics? That's even more time-consuming.

The bottom line: spreadsheets make it difficult to calculate and track your AR KPIs over time. These necessary tasks consume too much of your day - time better spent on strategic growth decisions and implementation.

Automation and dedicated AR tools are essential for effective tracking and improvement of your collection performance.

Limitations of Using Billing Tools for AR Metrics

While using existing billing tools might seem convenient, it's not optimal for tracking AR KPIs specifically.

Billing tools and accounting software have the advantage of centralizing data as a single source of truth. You know when an invoice is marked paid, the money is likely in your account. Real-time operation (versus daily synchronization) is a bonus.

However, billing software is limited in scope. It might have basic metrics tracking, but it's not specialized for accounts receivable. This impacts:

• Available metrics
• Feature depth
• Data analysis capabilities

Because these solutions are incomplete for AR KPI tracking, you end up switching between tools anyway.

The Drawbacks of Building Internal Tracking Systems

Some CFOs consider building their own tracking systems for more customization. While appealing in theory, this approach has significant drawbacks:

Future-Proofing Challenges

• Difficult to anticipate evolving needs
• Requires constant updates for business changes
• Needs ongoing documentation and training updates

Resource Inefficiency

• Competes with other IT priorities
• Requires ongoing maintenance
• Consumes significant time and budget

Misplaced Responsibility

• Takes focus away from core financial duties
• Creates technical support burden
• Requires constant system monitoring

Why ÉquiSettle is Your Best Solution for AR Metrics

Benefits of Using ÉquiSettle

ÉquiSettle is the most efficient way to gather data, analyze it, and take action. Our platform is metric-centered, providing:

• Live AR reports
• Real-time cash collection tracking
• Instant access to billing cohorts
• DSO and aging balance analytics

Advanced Features

• Risk account identification
• Automated collection workflows
• Integration with existing finance stack
• Customizable payment reminders
• Email templates for effective communication

Key Metrics Tracking

DSO Optimization

ÉquiSettle automatically calculates your Days Sales Outstanding using the most accurate methods, allowing you to:

• Track DSO trends over time
• Identify payment pattern changes
• Make informed credit policy decisions

Aging Balance Monitoring

Our platform provides clear visualization of unpaid invoices across categories:

• 0-30 days overdue
• 30-60 days overdue
• 60-90 days overdue
• 90+ days overdue

Billing Cohort Analysis

ÉquiSettle's cohort tracking helps you:

• Monitor collection efficiency
• Track invoice groups over time
• Identify trends in payment behavior
• Take immediate action on overdue accounts

Key Takeaways

• Spreadsheets are limited, error-prone, and time-consuming for AR metric tracking
• Basic billing software lacks the depth needed for comprehensive AR analytics
• Building internal systems is resource-intensive and creates unnecessary technical burden
• ÉquiSettle provides automated, accurate, and actionable AR metrics tracking
• Our platform saves time while providing deeper insights for improved collections

Ready to transform your AR metrics tracking? Try ÉquiSettle today and experience the difference automated AR management can make for your business.

www.equisettle.co.uk/sign-up