KPI Library - Credit and Collections KPIs

Why use the KPI Library?

Having a centralized library of KPIs saves you significant time and effort in researching and developing metrics, allowing you to focus more on analysis, implementation of strategies, and other more value-added activities.

This vast range of KPIs across various industries and functions offers the flexibility to tailor Performance Management and Measurement to the unique aspects of your organization, ensuring more precise monitoring and management.

Each KPI in the KPI Library includes 12 attributes:

KPI definition
Potential business insights [?]
Measurement approach/process [?]
Standard formula [?]
Trend analysis [?]
Diagnostic questions [?]
Actionable tips [?]
Visualization suggestions [?]
Risk warnings [?]
Tools & technologies [?]
Integration points [?]
Change impact [?]

It is designed to enhance Strategic Decision Making and Performance Management for executives and business leaders. Our KPI Library serves as a resource for identifying, understanding, and maintaining relevant competitive performance metrics.

Need KPIs for a function not listed? Email us at support@flevy.com.

We have 50 KPIs on Credit and Collections in our database. 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. Furthermore, these indicators help align the credit and collections department's strategy with overall financial objectives, supporting informed decision-making and strategic planning to enhance the company's financial health and sustainability.

IMPORTANT: 18 days left until the annual price is increased from $99 to $149.

$99/year

Subscribe to the KPI Library

KPI	Definition	Business Insights [?]	Measurement Approach	Standard Formula
Accounts Receivable Turnover Ratio More Details	A measure of how often a company collects its average accounts receivable during a period, indicating the efficiency of the credit and collections process.	Indicates how effectively a company is managing its accounts receivable and credit policies, with higher turnover signifying more efficient collections.	Considers net credit sales and average accounts receivable during a period.	Net Credit Sales / Average Accounts Receivable
Trend Analysis [?] An increasing accounts receivable turnover ratio may indicate more efficient collections processes or a shift towards more credit sales. A decreasing ratio could signal issues with collections, credit policies, or a decrease in sales volume. Diagnostic Questions [?] Are there specific customer segments or regions with consistently high or low turnover ratios? How does our turnover ratio compare with industry benchmarks or historical performance? Actionable Tips [?] Implement stricter credit policies to reduce the risk of late payments or bad debts. Offer discounts for early payment to incentivize quicker collections. Regularly review and update credit limits based on customer payment history and financial health. Visualization Suggestions [?] Line charts showing the trend of the turnover ratio over time. Pareto charts to identify the most significant contributors to accounts receivable turnover. Risk Warnings [?] A consistently high turnover ratio may indicate overly aggressive credit policies that could lead to increased bad debt. Conversely, a consistently low ratio may suggest overly conservative credit policies that could limit sales potential. Tools & Technologies [?] Accounting software with built-in accounts receivable management features, such as QuickBooks or Xero. Credit management platforms to automate credit decisions and monitor customer creditworthiness. Integration Points [?] Integrate accounts receivable turnover data with sales and customer relationship management systems to identify patterns and correlations. Link with financial planning and analysis tools to forecast cash flow and working capital needs based on turnover ratios. Change Impact [?] Improving the turnover ratio can positively impact cash flow and working capital, potentially reducing the need for external financing. However, overly aggressive efforts to increase the ratio may strain customer relationships and lead to lost sales opportunities.
Aging Report More Details	This report shows the breakdown of outstanding receivables by age bracket, typically in 30-day increments. It helps identify delinquent accounts that require immediate attention.	Helps identify potential cash flow issues and prioritize collection efforts by showing overdue payments.	Tracks invoices by the length of time they are outstanding.	No standard formula; it's a categorization of receivables based on age (e.g., 0-30 days, 31-60 days, etc.)
Trend Analysis [?] Aging report trends may show an increasing number of delinquent accounts, indicating potential cash flow issues or customer credit problems. A decreasing trend in delinquent accounts could signal improved credit management or a more stable customer base. Diagnostic Questions [?] Are there specific customers or industries that consistently have outstanding receivables? How does our aging report compare with industry benchmarks or historical data? Actionable Tips [?] Implement stricter credit policies to reduce the number of delinquent accounts. Offer early payment discounts to incentivize prompt payment from customers. Utilize collection agencies or legal action for severely delinquent accounts. Visualization Suggestions [?] Line charts to track the trend of outstanding receivables over time. Pie charts to visualize the distribution of outstanding receivables by age bracket. Risk Warnings [?] High levels of delinquent accounts can impact cash flow and overall financial stability. Failure to address delinquent accounts promptly can lead to increased bad debt expenses. Tools & Technologies [?] Use accounting software with built-in aging report functionality, such as QuickBooks or Xero. Customer relationship management (CRM) systems can help track customer payment history and communication regarding outstanding receivables. Integration Points [?] Integrate aging report data with accounting systems to streamline the collection process and maintain accurate financial records. Link aging report information with customer relationship management (CRM) systems to facilitate targeted collection efforts and customer communication. Change Impact [?] Improving the aging report can positively impact cash flow and working capital, but may require additional resources for collection efforts. A high number of delinquent accounts can strain customer relationships and impact the company's reputation.
Average Credit Term More Details	Days	Assesses the credit terms being offered and how they compare with industry standards.	Accounts for the average number of days credit is extended to customers.	Sum of individual credit terms offered / Total number of credit terms extended
Trend Analysis [?] An increasing average credit term may indicate a shift towards more lenient credit policies or a decrease in customer payment behavior. A decreasing average credit term could signal tighter credit controls or improved customer payment habits. Diagnostic Questions [?] Are there specific customer segments or industries that consistently require longer credit terms? How does our average credit term compare with industry benchmarks or historical data? Actionable Tips [?] Implement credit scoring systems to better assess customer creditworthiness and set appropriate credit limits. Offer discounts for early payment to incentivize prompt customer settlements. Regularly review and adjust credit terms based on customer payment behavior and credit risk assessments. Visualization Suggestions [?] Line charts showing the trend of average credit term over time. Comparison bar charts displaying average credit terms by customer segment or industry. Risk Warnings [?] Extending credit terms too liberally can lead to increased bad debt and cash flow issues. Overly strict credit terms may result in lost sales opportunities and strained customer relationships. Tools & Technologies [?] Credit management software like HighRadius or CreditPoint for automated credit assessment and monitoring. Accounting systems with robust credit management modules to track and analyze credit term data. Integration Points [?] Integrate credit term analysis with sales and customer relationship management systems to align credit decisions with sales strategies. Link credit term data with financial planning and analysis tools to assess the impact on cash flow and working capital. Change Impact [?] Extending credit terms may improve customer satisfaction and loyalty but could increase the risk of late payments and bad debt. Tightening credit terms may reduce bad debt but could potentially lead to customer dissatisfaction and lost sales.
KPI Library $99/year Navigate your organization to excellence with 15,468 KPIs at your fingertips. Subscribe to the KPI Library CORE BENEFITS 50 KPIs under Credit and Collections 15,468 total KPIs (and growing) 328 total KPI groups 75 industry-specific KPI groups 12 attributes per KPI Full access (no viewing limits or restrictions) FlevyPro and Stream subscribers also receive access to the KPI Library. You can login to Flevy here.
Average Days Delinquent (ADD) More Details	The average number of days that an account is delinquent before payment is received. A lower ADD indicates more effective credit and collections management.	Measures the average delay in payment from customers, showing potential credit policy inefficiencies.	Considers average number of days past due for all delinquent invoices.	(Sum of Days Past Due for all Invoices / Number of Delinquent Invoices)
Trend Analysis [?] A decreasing average days delinquent (ADD) may indicate improved credit and collections processes or better customer payment behavior. An increasing ADD could signal issues with customer creditworthiness, economic downturn, or ineffective collections strategies. Diagnostic Questions [?] Are there specific customer segments or industries that contribute the most to the average days delinquent? How does our ADD compare to industry benchmarks or historical data? Actionable Tips [?] Implement stricter credit policies and conduct thorough credit checks before extending credit to customers. Offer incentives for early payment or penalties for late payment to encourage timely settlements. Enhance collections processes by implementing automated reminders and escalation procedures for overdue accounts. Visualization Suggestions [?] Line charts showing the trend of ADD over time to identify patterns and seasonality. Pareto charts to identify the most significant contributors to delinquency and prioritize collections efforts. Risk Warnings [?] High ADD can lead to cash flow issues and increased bad debt write-offs. Chronic delinquency may indicate weaknesses in credit assessment or collections practices that need to be addressed. Tools & Technologies [?] Accounting software with built-in receivables management and aging reports to track delinquent accounts. Credit scoring and risk assessment tools to evaluate customer creditworthiness and set appropriate credit limits. Integration Points [?] Integrate ADD tracking with customer relationship management (CRM) systems to identify patterns and customer behavior that may impact delinquency. Link with financial forecasting and budgeting systems to anticipate the impact of delinquency on cash flow and financial performance. Change Impact [?] Reducing ADD can improve cash flow and working capital, but may require additional resources for credit monitoring and collections efforts. Conversely, a high ADD can strain relationships with customers and impact the organization's reputation and creditworthiness.
Average Payment Days (APD) More Details	The average number of days it takes for customers to pay their invoices. A lower APD indicates better credit and collections management.	Provides insight into the payment habits of customers and the effectiveness of credit terms.	Measures the average number of days it takes customers to pay their invoices.	(Sum of Days to Pay Each Invoice / Total Number of Paid Invoices)
Trend Analysis [?] An increasing average payment days (APD) may indicate a decline in customer financial health or a shift in payment behavior. A decreasing APD could signal more efficient collections processes or improved customer relationships. Diagnostic Questions [?] Are there specific customer segments or industries with consistently longer payment cycles? How does our APD compare with industry benchmarks or historical data? Actionable Tips [?] Implement stricter credit policies to reduce the risk of late payments. Offer incentives for early payment to encourage customers to settle invoices more promptly. Regularly review and update customer credit limits based on their payment history and financial stability. Visualization Suggestions [?] Line charts showing APD trends over time. Bar graphs comparing APD across different customer segments or geographic regions. Risk Warnings [?] Extended APD can strain cash flow and impact the organization's ability to meet its own financial obligations. Consistently high APD may indicate a need for more rigorous credit risk assessment and management. Tools & Technologies [?] Accounting software with built-in receivables management and reporting capabilities. Customer relationship management (CRM) systems to track customer interactions and payment history. Integration Points [?] Integrate APD tracking with accounting and financial systems to ensure accurate reporting and analysis. Link APD data with sales and marketing platforms to align credit and collections strategies with customer acquisition and retention efforts. Change Impact [?] Reducing APD can improve cash flow and working capital, but may require additional resources for collections efforts. Conversely, a prolonged increase in APD can impact the organization's financial health and liquidity, affecting investment and growth opportunities.
Bad Debt Percentage More Details	The percentage of accounts that have become uncollectible and have to be written off as bad debt. A lower percentage indicates better credit risk management.	Indicates the quality of credit sales and effectiveness of collections efforts, with lower percentages being favorable.	Reflects the proportion of receivables that have been written off as uncollectible.	(Total Bad Debts / Total Credit Sales) * 100
Trend Analysis [?] A rising bad debt percentage may indicate a deterioration in the credit quality of customers or economic downturn. A decreasing percentage could signal improved credit risk assessment and collection processes. Diagnostic Questions [?] Are there specific customer segments or industries with consistently high bad debt percentages? How does our bad debt percentage compare with industry benchmarks or historical data? Actionable Tips [?] Implement stricter credit policies and conduct thorough credit checks before extending credit to customers. Enhance collection efforts by establishing clear payment terms and actively following up on overdue accounts. Consider offering early payment discounts to incentivize timely payments and reduce the risk of bad debts. Visualization Suggestions [?] Line charts showing the trend of bad debt percentage over time. Pareto charts to identify the customers or accounts contributing the most to bad debts. Risk Warnings [?] High bad debt percentages can lead to financial losses and impact cash flow. Chronic bad debt issues may indicate weaknesses in credit assessment and collection processes that need to be addressed. Tools & Technologies [?] Use credit scoring software to assess the creditworthiness of customers more accurately. Implement customer relationship management (CRM) systems to track and manage customer interactions and payment history. Integration Points [?] Integrate bad debt percentage tracking with accounting systems to monitor the impact on financial statements and cash flow. Link with sales and marketing platforms to align credit policies with customer acquisition strategies. Change Impact [?] Reducing bad debt percentage can improve profitability and strengthen the balance sheet. However, overly strict credit policies may limit sales growth and customer acquisition.

In selecting the most appropriate Credit and Collections KPIs from our KPI Library for your organizational situation, keep in mind the following guiding principles:

Relevance: Choose KPIs that are closely linked to your Corporate Finance objectives and Credit and Collections-level goals. If a KPI doesn't give you insight into your business objectives, it might not be relevant.

Actionability: The best KPIs are those that provide data that you can act upon. If you can't change your strategy based on the KPI, it might not be practical.

Clarity: Ensure that each KPI is clear and understandable to all stakeholders. If people can't interpret the KPI easily, it won't be effective.

Timeliness: Select KPIs that provide timely data so that you can make decisions based on the most current information available.

Benchmarking: Choose KPIs that allow you to compare your Credit and Collections performance against industry standards or competitors.

Data Quality: The KPIs should be based on reliable and accurate data. If the data quality is poor, the KPIs will be misleading.

Balance: It's important to have a balanced set of KPIs that cover different aspects of the organization—e.g. financial, customer, process, learning, and growth perspectives.

Review Cycle: Select KPIs that can be reviewed and revised regularly. As your organization and the external environment change, so too should your KPIs.

It is also important to remember that the only constant is change—strategies evolve, markets experience disruptions, and organizational environments also change over time. Thus, in an ever-evolving business landscape, what was relevant yesterday may not be today, and this principle applies directly to KPIs. We should follow these guiding principles to ensure our KPIs are maintained properly:

Scheduled Reviews: Establish a regular schedule (e.g. quarterly or biannually) for reviewing your Credit and Collections KPIs. These reviews should be ingrained as a standard part of the business cycle, ensuring that KPIs are continually aligned with current business objectives and market conditions.

Inclusion of Cross-Functional Teams: Involve representatives from outside of Credit and Collections in the review process. This ensures that the KPIs are examined from multiple perspectives, encompassing the full scope of the business and its environment. Diverse input can highlight unforeseen impacts or opportunities that might be overlooked by a single department.

Analysis of Historical Data Trends: During reviews, analyze historical data trends to determine the accuracy and relevance of each KPI. This analysis can reveal whether KPIs are consistently providing valuable insights and driving the intended actions, or if they have become outdated or less impactful.

Consideration of External Changes: Factor in external changes such as market shifts, economic fluctuations, technological advancements, and competitive landscape changes. KPIs must be dynamic enough to reflect these external factors, which can significantly influence business operations and strategy.

Alignment with Strategic Shifts: As organizational strategies evolve, evaluate the impact on Corporate Finance and Credit and Collections. Consider whether the Credit and Collections KPIs need to be adjusted to remain aligned with new directions. This may involve adding new Credit and Collections KPIs, phasing out ones that are no longer relevant, or modifying existing ones to better reflect the current strategic focus.

Feedback Mechanisms: Implement a feedback mechanism where employees can report challenges and observations related to KPIs. Frontline insights are crucial as they can provide real-world feedback on the practicality and impact of KPIs.

Technology and Tools for Real-Time Analysis: Utilize advanced analytics tools and business intelligence software that can provide real-time data and predictive analytics. This technology aids in quicker identification of trends and potential areas for KPI adjustment.

Documentation and Communication: Ensure that any changes to the Credit and Collections KPIs are well-documented and communicated across the organization. This maintains clarity and ensures that all team members are working towards the same objectives with a clear understanding of what needs to be measured and why.

By systematically reviewing and adjusting our Credit and Collections KPIs, we can ensure that your organization's decision-making is always supported by the most relevant and actionable data, keeping the organization agile and aligned with its evolving strategic objectives.

KPI Library

$99/year

Navigate your organization to excellence with 15,468 KPIs at your fingertips.

Subscribe to the KPI Library

CORE BENEFITS

50 KPIs under Credit and Collections
15,468 total KPIs (and growing)
328 total KPI groups

75 industry-specific KPI groups
12 attributes per KPI
Full access (no viewing limits or restrictions)

FlevyPro and Stream subscribers also receive access to the KPI Library. You can login to Flevy here.

Related Resources on the Flevy Marketplace

Financial Ratios (Comparables) Analysis

22-slide PowerPoint

LearnPPT Consulting

$39.00

Add to Cart

Corporate Finance Management

97-slide PowerPoint

SB Consulting

$89.00

Add to Cart

Chief Investment Officer (CIO) Toolkit

295-slide PowerPoint

SB Consulting

$99.00

Add to Cart

Comprehensive Guide to Financial Statement Analysis

89-slide PowerPoint

STRATICX

$49.00

Add to Cart

Financial Statement Generator: Cash or Accrual Basis

Excel template, ZIP

Jason Varner | SmartHelping

$45.00

Add to Cart

The Ultimate Guide to Financial Ratios

Excel template

Profit Vision

$39.00

Add to Cart

Financial Analysis for Consultants

192-slide PowerPoint

SB Consulting

$99.00

Add to Cart

Financial Statement Analysis

43-slide PowerPoint

PPT Lab

$39.00

Add to Cart

Trusted by over 10,000+ Client Organizations

Since 2012, we have provided best practices to over 10,000 businesses and organizations of all sizes, from startups and small businesses to the Fortune 100, in over 130 countries.