Every quarter, the Credit Research Foundation (CRF) releases a report on various collection metrics and how they have changed, broken down across industries. One particular metric that we’ve been following this year is the Collection Effectiveness Index, or CEI.
What is CEI?
Here’s a quick refresher. Your CEI is a measurement of your ability to get your customers to pay. It focuses on invoices presently due, which makes it effective for shorter interval measures. For those of you who need a reminder on the calculation, here’s a breakdown provided:
What’s happening to collection effectiveness?
The median of CEI across industries from data provided from CRF is always around 85%.
In the latest Q3 report, we saw CEI improve quarter over quarter (and year over year) -- and that’s exciting to us. As an accounts receivable (AR) SaaS company dedicated to revolutionizing human work (and getting you money in the door faster), we see improvements in the CEI as a sign that businesses are investing in their collections process. We’re no stranger to the impact of that investment.
AR SaaS has grown like wildfire both in product capabilities and market uptake. A $2.8 billion market in 2018, it is expected to nearly double by 2026, with software as a dominant segment driving this growth. Just in the last two years, we have experienced this growth and maturity first hand:
- Knowledge growth: Throughout our sales cycle, more and more prospects have heard of AR automation, and have increasing pre-existing knowledge to products. Businesses are educating themselves on how to purchase these solutions.
- Demand growth: There’s been remarkable growth in inbound inquiries on AR automation. This area of the back office is now actively looking to measure their performance against benchmarks, optimize processes, and introducing better tech.
- Solution growth: AR solutions are becoming more sophisticated and forward thinking. Nowadays, it isn’t enough to simply streamline collections workflow. Can you support payment? Cash application? Credit assessment? End-to-end capabilities will soon be table stakes. We have to stay ahead of the game through advance predictions.
Growth and maturity in the marketplace makes both the end-users and the solutions smarter. As a company with entrepreneurship in our DNA, we know that having knowledgeable customers eager to improve their processes means we can build better tools.
Shout out to CRF for another fantastic DSO report this quarter. We can’t wait to see what happens next.