Accounts Receivable Metrics and KPIs (2025)

A higher sales figure is exciting until you realise the cash isn’t coming at the expected rate.

For many businesses, revenue gets stuck in accounts receivable limbo. It slows down the cash flow and creates headaches for finance teams. That’s where tracking the right metrics makes all the difference.

To be more precise, accounts receivable isn’t only about sending invoices and waiting for the payments. It’s about managing the entire financial lifecycle, particularly what’s owed to a business. The absence of the correct data makes it hard to know where delays are happening, how efficient your team really is, or what’s putting your working capital at risk.

That’s why AR metrics and KPIs matter. They give you visibility, control, and the opportunity to improve. This article looks at the most critical account metrics and KPIs a business team in the UK should be tracking. The discussion follows how they can help you turn outstanding invoices into real cash, faster.

In the meantime, we’d also recommend you check out Wise Business, a cost-effective way to send business payments and receive money from abroad in multiple currencies, with conversions using the mid-market exchange rate.

💡 Learn more about Wise Business

What Are Accounts Receivable Performance Metrics?

Accounts receivable metrics are performance indicators that provide insight into how efficiently you’re turning invoices into cash. This efficiency level can directly impact your company’s liquidity and cash flow. Rather than waiting passively for payments, these metrics help you proactively monitor and manage outstanding balances.

Tracking AR involves keeping a close watch on how much money is tied up in unpaid invoices. Finance teams use a mix of tools, such as spreadsheets, accounting software, or even manual tracking, to stay on top of key A/R metrics. Businesses can spot issues early by monitoring figures like Days Sales Outstanding (DSO), receivables turnover, and average days delinquent. They can also identify similar patterns and adjust their collection strategies before cash flow takes a hit.

UK small businesses currently owe an average of £27,214 in late payments¹. This is a stark reminder of the heavy cost of slow collections. Integrating the right KPIs into your workflow gives you a powerful toolkit: real-time visibility, operational control, and actionable insights. In today’s competitive environment, that data isn’t optional.

Key Accounts Receivable Metrics to Monitor

Below, we talk about the six key metrics and KPIs you should monitor. Keep in mind, most businesses don’t track their AR performance, so if you’re doing that, you’re most likely going in the right direction.

Days Sales Outstanding (DSO)

Days Sales Outstanding (DSO) is a metric that shows how long it takes, on average, for your business to collect payment after making a sale on credit. In simple terms, it helps you understand how quickly cash is coming in. A low DSO means customers pay on time, keeping your cash flow healthy. A high DSO, on the other hand, may point to delays in collections or inefficiencies in your payment processes.

To calculate DSO, use this formula:

DSO = (Accounts Receivable ÷ Total Credit Sales) × Number of Days in Period

Your DSO should stay close to your payment terms. If you expect payment in 30 days, a DSO under 45 is a good benchmark.

Best Possible Days Sales Outstanding (BPDSO)

Best possible Days Sales Outstanding (BPDSO) portrays what a favorable scenario should look like. It tells you how quickly you’d collect payments if every customer paid exactly on time. Unlike standard DSO, which includes overdue invoices, BPDSO focuses only on current receivables within agreed payment terms. This gives you a clean, baseline measure of what “good” could look like for your collections process.

To calculate it, subtract past-due receivables from total current receivables, divide that by your total credit sales, and multiply by the number of days in your chosen period.

Formula:

BPDSO = [(Current Receivables − Past Due Receivables) ÷ Total Credit Sales] × Number of Days

In the best-case scenario, your DSO should be as close as possible to your BPDSO. A big gap between the two usually means your collection process has inefficiencies. The closer they are, the better your cash flow (and the stronger your financial operations).

Average Days Delinquent (ADD)

Average Days Delinquent (ADD) shows how many days, on average, payments arrive after the due date. It reflects the gap between when you should have been paid and when the money actually comes in. To calculate ADD, subtract your best possible DSO from your actual DSO.

Formula:

ADD = DSO – Best Possible DSO

A high ADD points to late-paying customers and possible issues in your collections process. Meanwhile, a low ADD signals more timely payments and stronger control over outstanding invoices. This metric can help reveal which accounts are slipping and where follow-ups may be needed.

Note: Relying on ADD alone won’t give you the whole picture. Track it alongside key metrics, like DSO and best possible DSO, across several months. Doing so will highlight trends and help fine-tune your collections strategy for more reliable cash flow.

Collections Effectiveness Index (CEI)

The Collections Effectiveness Index (CEI) measures how precisely a business collects payments over a given period. It is expressed as a percentage and compares the amount collected against what was available to collect. A higher CEI is usually over 80% and conveys that the collection system is working well. A complete 100% shows that every dollar due was collected on time (this happens rarely).

In contrast to the DSO, which focuses on payment speed, CEI looks at the actual recovery of outstanding amounts. It highlights how much potential revenue slips through the cracks due to late payments or bad debt.

Check out its formula:

CEI = [(Beginning A/R + Credit Sales – Ending A/R) ÷ (Beginning A/R + Credit Sales – Current A/R)] × 100

CEI works best as an internal performance tool rather than for industry benchmarking. A consistently low CEI may signal gaps in your collection strategy. It also highlights the need to tighten follow-up processes or adopt automation.

Accounts Receivable Turnover Ratio

The Accounts Receivable Turnover Ratio shows how often your business collects its average receivables during a specific period. It reflects how effective your credit policies are and how well your collections team performs. A higher ratio means you’re collecting payments more frequently. This leads to stronger cash flow and fewer overdue accounts.

The formula is simple:

AR Turnover Ratio = Net Credit Sales ÷ Average Accounts Receivable

Let’s say your net credit sales are £90,000 and your average receivables are £12,000. That gives you a ratio of 7.5. This means that you have collected your average receivables 7.5 times over the year. You can also use this to estimate your collection period. Divide 365 by your ratio (365 ÷ 7.5 = ~49 days).

Indeed, a high ratio is good for the company, but there are times when flexibility matters more than incoming cash. For example, you may be forced to ignore the low ratio about retaining long-term clients or boosting sales.

Number of Revised Invoices

The number of revised invoices shows how often your team needs to correct or resend invoices during a given period. These changes might happen due to billing mistakes, incorrect quantities, or payment term updates. Often, customer disputes trigger revisions, requiring extra time to resolve and resend the invoice.

Each revision adds delays to your payment timeline. Reviewing the issue, making changes, and delivering the updated invoice takes time. Some customers may even treat the revised invoice as a fresh start to their payment clock. This, in turn, slows down cash flow.

Tracking this number helps pinpoint recurring problems in your invoicing process. A high count could indicate manual data entry errors or unclear billing information. On the other hand, reducing invoice revisions can improve a team’s efficiency and accelerate payments. You can also consider investing in automation tools to make the process less flawed and keep payments moving on time.

How to Analyse and Track AR Metrics

By now, it’s pretty clear that each KPI requires collecting accurate data. Your finance team must always stay in the loop with all departments. These figures let you track your progress and see how adjustments or improvements influence your accounts receivable performance.

The following are some ways to evaluate and track the AR metrics:

• Set Clear KPIs: Start by choosing the right metrics, like DSO, CEI, ADD, and turnover ratio. Track them regularly, such as monthly or quarterly, to keep your data consistent and valuable.
• Collect and Visualise Data: Use your accounting software or spreadsheets to gather data, then visualize it using dashboards or graphs. Clear visuals help you quickly spot trends, like rising DSO or improved CEI, so you can act fast when things shift.
• Segment Customer Groups: Break your AR data down by customer type, region, or industry. This helps you see which groups pay on time and which need closer attention, and it curates more focused collection strategies.
• Review Aging and Disputes: Review how long invoices stay unpaid and how often revisions happen. High numbers here can point to deeper issues like billing errors or unclear terms.

The whole point of tracking KPIs and metrics is to let a venture follow the right direction. Any misstep or wrong calculation can gradually crumble all your efforts into pieces. Hence, it’s essential to be mindful when calculating the figures and have your finance team on high alert when a metric seems to bring negative impacts.

A UK manufacturing firm reduced its DSO from over 200 days to 80 in just six months after partnering with Pecunia2016². They focused on overdue accounts, set up clear payment plans, and made better use of their credit system. This resulted in a stronger cash flow, less bad debt, and a more motivated team.

---

Receive international payments with Wise Business

Wise can help UK businesses, freelancers and sole traders get paid by customers in multiple currencies, with low fees and the mid-market exchange rate.

Your Wise Business account comes with local account details (only with Wise Business Advanced) to get paid in 8+ major foreign currencies like Euros and US Dollars just as easily as you do in Pounds.

All you need to do is pass these account details (only with Wise Business Advanced) to your customer, or add them to invoices, and your customer can make a local payment in their preferred currency. You can also use the Wise request payment feature to make it even easier and quicker for customers to pay you.

Get started with Wise Business 🚀

---

FAQs – Accounts Receivable Metrics and KPIs

Here are some of the most common questions:

What is categorised as a good AR percentage?

A higher percentage means most customers are paying their invoices on time. It keeps the cash flow smooth and reduces the need to chase payments. It gives a quick view of how well your payment process is working. Try to keep 80 to 90% of your receivables up to date.

Is AR a debit or a credit?

Accounts receivable are recorded as a debit because they represent money that customers owe to the business.

How do I choose the right KPIs?

Focus on what matters most to your cash flow, like how quickly you collect payments and how often invoices are disputed. Choose KPIs that align with your business goals, such as Days Sales Outstanding (DSO), Collection Effectiveness Index (CEI), and Average Days Delinquent (ADD). The right mix depends on your industry, customer base, and payment terms. Keep it simple and relevant.

---

*Disclaimer: The UK Wise Business pricing structure is changing with effect from 26/11/2025 date. Receiving money, direct debits and getting paid features are not available with the Essential Plan which you can open for free. Pay a one-time set up fee of £50 to unlock Advanced features including account details to receive payments in 22+ currencies or 8+ currencies for non-swift payments. You’ll also get access to our invoice generating tool, payment links, QuickPay QR codes and the ability to set up direct debits all within one account. Please check our website for the latest pricing information.

Sources used:

1. https://quickbooks.intuit.com/uk/press/small-businesses-are-owed-27k-in-late-payments-on-average/
2. https://pecunia2016.co.uk/case-studies/case-study-company-turnaround/

Sources last checked on date: 30-Jun-2025