Collection Effectiveness Index

Definition

What is the Collection Effectiveness Index?

The Collection Effectiveness Index (CEI) is a measure of the capacity of a business to recover its accounts receivable from customers. The collection effectiveness index calculates the sum of receivables collected time over the same time. Besides, the collection effectiveness index is significantly more reliable than the daily sales outstanding (DSO).

A CEI close to 80 percent or above suggests a highly successful selection method, while a CEI of about 50 percent and below is considered poor and should be further evaluated.

Importance of collection effectiveness index

The collection effectiveness index measures the amount obtained over a given time to the number of receivables available for collection over that time. A score close to 100 percent shows that the collection department has been very successful in collecting from consumers.

The outcome of your CEI estimate will provide you with actionable knowledge. First, it reveals the success of the team in receiving receivables. It also shows how easily receivables transform into closed accounts.

How to calculate the collection effectiveness index?

The collection effectiveness index is a method of measurement that measures the cumulative success of collection efforts over a particular time. Here’s how CEI estimation works:

Beginning Receivables + Monthly Credit Sales – Ending Total Receivables divided by Beginning receivables + Monthly Credit Sales – Ending Current Receivables

This quotient is then multiplied by 100.

 

What is the Collection Effectiveness Index
What is the Collection Effectiveness Index?

Outsourcing FAQ

What is Bookkeeping?

What is bookkeeping?

Bookkeeping refers to the process of recording transactions to general and special journals and posting these transactions to their respective ledgers. This should be done by applying generally-accepted accounting principles (GAAP) the Financial Accounting Standards Board (FASB) for US companies. Bookkeeping is an important record-keeping function of financial accounting that is essential in a duly-registered business of any kind.

Bookkeeping function consists of the first three steps of the accounting cycle: analyzing transactions, recording transactions in the general journal, and posting the transactions to the ledger. Most businesses outsource bookkeeping because hiring bookkeepers is expensive and most small-medium businesses doesn’t do large volumes of transactions per day.

Outsourcing bookkeeping

The bookkeeping function is best outsourced in order to keep administrative costs low while helping small businesses grow and become stable. Another advantage is that you are assured that you are working with a skilled and competent professional that has the appropriate experience and educational background for the job. Outsource Accelerator provides you the best bookkeeping outsourcing companies in the Philippines, where you can save up-to 70% on staffing cost.

What is Build-Operate-Transfer (BOT)?

What is Build-Operate-Transfer?

Build-Operate-Transfer is an arrangement found in the outsourcing industry, as well as across other industry on a technical sense, is a type of concession arrangement wherein 'Entity A' delegates the right to build and to operate a particular project to 'Entity B' within a certain period. This timeframe allows Entity B to recuperate their investment and get profits while Entity A gets a more established business after the turnover.

The BOT setup is typical for government projects such as infrastructures. A common example would be the construction of expressways where the government gives the right to build and to operate the expressway in favour of a private business. In return, the private entity shall finance the project and enjoy the revenues they can derive within the contract frame. After the given period, the private entity shall be obliged to transfer the ownership back to the government.

Build-Operate-Transfer in outsourcing

A Build-Operate-Transfer arrangement enables entities with limited capital and financing to implement their projects with the help of another entity who is willing to start the project. This type of outsourcing gives way to a broader range of resources and talent, which could contribute to a better and well-thought-out project - read our full BOT article for more information.

A BOT arrangement can take on many forms, but in its simplest and most common form, it is the mutual understanding that a BPO will help build a team and operations for a client and that one day, the client might take that team out on their own and incorporate, or become a 'captive'.

Outsource Accelerator can help set up your BOT arrangement with the outsourcing supplier to ensure that the best terms and prices are provided for your business.

What is Automated Clearing House (ACH)?

What is the Automated Clearing House (ACH)

Automated Clearing House (ACH) refers to a network of financial transactions that specializes in coordinating and clearing electronic payments and transfers. This is popularly known as direct deposit, direct pay, or electronic check. With this, high-volume payments or transfers can be processed easily.

The National Automated Clearing House Association (NACHA) currently handles this network in the United States since 1974 and the Bangko Sentral ng Pilipinas is its counterpart in the Philippines.

ACH payments in businesses

ACH payments in businesses are done through bank transfer from one’s business checking account to another. Payments are usually sent and received within three days. ACH fees may also apply, depending on the volume of transactions done.

Outsource Accelerator provides you the best outsourcing companies in the Philippines, where you can save up-to 70% on staffing cost. We have over 3,000 articles, 200+ podcast episodes, and a comprehensive directory with 700+ BPOs… all designed to make it easier for clients to learn about, and engage with, outsourcing.

What is Business Process Outsourcing (BPO)?

What is Business Process Outsourcing BPO?

Business Process Outsourcing (BPO) is the engagement of services from a third-party provider. BPO uses various technology-enabled services to hasten the delivery of services. The business activities could be back-office such as, but not limited to, payroll, accounting, human resources, or front office jobs like customer service, sales, and marketing, etc. In the case of content providers, these business activities could mean hiring writers, remote editors, or virtual assistants.

BPO speeds up processes and enhances efficiency. Companies that outsource some of their business activities use their time on core services and competencies. With this shift in focus, companies improve their current processes that may result in improved customer satisfaction. BPO helps companies divert their resources to more critical business strategies. Often, companies find it impractical to hire a full-time position in-house because of the cost associated with doing so.

How does Business Process Outsourcing work?

When a business engages an external specialist to manage and operate some of its internal processes, it's referred to as business process outsourcing. Such ‘processes’ include customer service, accounting and finance, or sales. It is different from hiring an agency to do specific tasks, as the outsourcing provider (BPO) is more concerned with the ongoing production of labour-intensive tasks, instead of the higher-level strategy and guidance.

Now, business process outsourcing has broadened and is more akin to staff augmentation, or staff leasing.

What are the benefits of business process outsourcing?

There are many benefits to outsourcing, as well as some downsides and risks. The common benefits include:

Cost savings: significant savings of up to 70%, leveraging the lower global salaries Global market: access to a bigger employment pool of talent Global presence: having operational across the globe increases trade opportunities Flexible workforce: reduces internal local labour and employment compliance obligations Leverage skill: leveraging the skills of other specialist companies Focus: enables the client company to focus on their core functions

 

Business process outsourcing examples

The business process outsourcing sector is a vast industry, generating over $200bn annually, and employing many millions of people worldwide. Some examples include:

Big enterprise

Facebook and Uber outsource many of their operational functions, including content moderation for Facebook, and customer service for Uber

Medium-size businesses

A medium business with 50-500 staff might outsource the labour-intensive accounting and finance functions to a team in the Philippines.

Small business and entrepreneur

It is common for small business owners to have a Virtual Assistant (VA) working for hem full time, remotely from the Philippines.

What are the different types of BPO?

The type of business process outsourcing can be characterised by their specialisation, location, and size.

Generalist or specialist BPOs

Business process outsourcing is in the human resources and professional services sector. However, their services extend across all industries. The majority of BPOs are generalist, in that they offer a full range of professional services, although some specialise in certain verticals (ie accounting, or animation).

Location

Business process outsourcing typically operates form developing nations such as the Philippines, India, and Colombia. They typically have cheaper cost-of-living and bigger populations. Different locations offer different advantages.

Size of BPO

The bigger BPOs employ more than 250,000 people. They are huge, global operations. Medium-sized BPOs range from 500-5,000 staff and offer a full range of services. The smaller BPOs might have 1-500 people.

Functions of business process outsourcing

Collectively, business process outsourcing provides any kind of staffing solution. Common functions of BPO include:

Finance and accounting: operational, technical and specialist functions Healthcare: various functions of the backend of the healthcare and health-insurance industries Creative and content: everything from post-production of Hollywood movies to newspaper and website content Tech, IT and development: network management, web and app development and maintenance Sales & customer support: ongoing sales and customer operational support and delivery Marketing: ongoing marketing, communication and branding activities Talent and HR: externalising the management of company HR, recruitment and compliance Administration: general business administration and operational activities Business Process Outsourcing (BPO) services

Outsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO). We have over 4,000 articles, 200+ podcast episodes, and a comprehensive directory with 700+ BPOs… all designed to make it easier for clients to learn about, and engage with, business process outsourcing.

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