Mastering AR KPIs: Benchmarking the Metrics That Matter Most for Accounts Receivable Performance

If you're responsible for the financial health of your organization, knowing the right accounts receivable (AR) metrics to monitor—and how to improve them—is essential. The right key performance indicators (KPIs) don’t just measure your AR performance, they help shape smarter strategies to improve working capital, reduce risk and enhance customer relationships.

Yet, many companies struggle with benchmarking. What does “good” look like for important AR metrics? In a recent on-demand webinar hosted by Esker, Creditsafe and Optimize Receivables, AR experts walked through five of the most crucial KPIs in today’s financial climate. This blog post shares those insights, including:

• How to calculate each KPI
• Why they matter to your AR performance
• How your metrics stack up against industry benchmarks and your peers
• Practical tips to improve your results using AI and automation

Understanding AR KPI Benchmarks

1. Days beyond terms (DBT)

What is DBT? DBT measures how many days, on average, a customer pays after the due date.
DBT formula: Total days of late across invoices / Number of invoices paid late
Why DBT matters for your AR department: As a core indicator of how long it takes to turn receivables into cash, a high or rising DBT suggests poor customer payment behavior or issues with your collections strategy.
Audience poll vs. benchmark: During the webinar, 60% of attendees reported an average DBT of 16-50+ days. Compare that with the industry benchmark of 19 days, and it’s clear that most organizations have room for improvement.
How automation helps: Esker's automated collections tools apply AI to forecast payment behavior and prioritize follow-ups, helping Finance teams proactively manage late payments and drive down DBT.

2. Collections effectiveness index (CEI)

What is the collections effectiveness index? CEI tracks how efficiently a company collects its receivables over a defined period.
CEI formula: (Beginning AR + Credit sales - Ending total AR) / (Beginning AR + Credit sales - Ending current receivables) x 100
Why CEI matters: CEI paints a clear picture of collections performance and cash conversion effectiveness.
Audience poll vs. benchmark: While a strong CEI is anything above 80%, nearly 40% of attendees admitted they don’t track it. Companies with automation in place (especially service organizations) typically report significant improvements in CEI.
How automation helps: Esker's Collections Management solution enhances CEI through AI-driven payment predictions and personalized follow-ups, ensuring at-risk accounts get priority attention.

3. Invoice dispute percentage

What is invoice dispute percentage? This metric measures how often invoices are disputed.
Invoice dispute percentage formula: (Number of disputed invoices / Total number of invoices issued) x 100
Why invoice dispute percentage matters: High dispute rates delay payment, increase DSO and strain customer relationships.
Audience poll vs. benchmark: The industry benchmark is 2%, yet a majority of webinar participants reported a dispute percentage exceeding that—some even reporting over 10%.
Customer example: Trek Bicycle reduced dispute handling time significantly by implementing Esker's centralized AR solution, resulting in better communication and faster resolution.
How automation helps: Esker's AI triages incoming claims, auto-populates dispute reasons and routes them for resolution, helping reduce dispute volume and cycle time.

4. Bad debt ratio

What is bad debt ratio? Bad debt ratio indicates the portion of credit sales not expected to be collected.
Bad debt ratio formula: Net credit sales / Average accounts receivable
Why bad debt matters: High bad debt can indicate poor credit assessment practices and negatively impact cash forecasting.
Audience poll vs. benchmark: Most attendees hovered around the 1.6-3% range, with 1.5% being the industry standard.
How automation helps: Esker leverages AI to improve credit scoring and risk analysis, helping companies onboard creditworthy customers and reduce future write-offs.

5. Credit onboarding timeline

What is credit onboarding timeline? Credit onboarding timeline measures the time from initial credit application submission to approval.
Credit onboarding timeline formula: Date of approval - Date of application submission
Why onboarding time matters: Long onboarding times delay revenue recognition and negatively affect the customer experience.
Audience poll vs. benchmark: Only a small fraction of attendees reported full automation with timelines under six weeks, while the industry benchmark is 2.5 days.
How automation helps: Esker streamlines credit approvals using intelligent workflows and integrated data sources, cutting onboarding timelines down from weeks to days.

Practical strategies to improve KPI performance

The best AR teams don’t just track KPIs, they improve them. Here’s three strategies to improve your KPI performance within your AR team:

• Benchmark internally and externally: Compare your KPIs to both peers and industry standards. Use tools like Esker’s AR dashboard to track performance in real time.
• Automate intelligently: AI-driven features such as payment prediction, dispute triage and smart task routing reduce manual effort and accelerate AR processes.
• Learn from leaders: Clario reduced past-due payments by 71% by automating invoice delivery and dispute handling through Esker.

Why closely monitoring your AR KPIs matters: Metrics like DBT, CEI and bad debt ratio aren’t just financial indicators, they're levers for improving strategic agility, customer satisfaction and cash predictability.

Why choose Esker for AR automation?

Esker’s Accounts Receivable software suite empowers Finance teams with real-time visibility, AI-enhanced workflows and seamless ERP integration. Esker offers a centralized, end-to-end platform that spans across credit management, collections, cash application, customer invoicing, payments, and deductions.

With Esker, organizations gain:

• AI-powered insights to forecast payments, prioritize actions and detect risk
• Global compliance and scalability with support for 130+ languages and multi-entity rollouts
• Faster onboarding and credit decisions through real-time data integration

Schedule a demo to see how Esker can help you turn AR KPIs into a competitive advantage.