Can AR Set Collection Goals for Sales?

In this uncertain economic environment, strong collection processes and cash flow management are critical to business survival and success.

To monitor the effectiveness and efficiency in these areas, AR employs certain internal Key Performance Indicators (KPIs). Some of the KPIs that will be discussed in this article are Collection Effectiveness Index (CEI), Days Sales Outstanding (DSO), % Paid on time/late, and % Past due balance over X days. These KPIs provide actionable insights into an organization's performance, enabling informed decision-making and continuous improvement.

However, despite their proven efficacy, KPIs alone may not reflect the influence of external factors that can impact performance. For example, AR’s collection timeliness can sometimes be negatively impacted by other departments—even though AR has no direct oversight over those departments.

For that reason, AR leaders are working to promote inter-departmental communication, particularly with Sales. In the following discussion, we will demonstrate how AR and Sales leaders are working cooperatively to help AR meet collection goals.

How Can AR Get Sales to Collaborate?
Recently, the following “Ask the Expert” question was posed by Bilyana Gavrilova, AOCM, APS, APM, Senior Director of Global Shared Services at Catalina:

“Sales owns the relationship with the customer and often plays an instrumental role in the payment collection process. What is the best way for AR to sync priorities across the organization, to encourage Sales and Finance to work hand in hand toward the same goals for collection?”

Also, what is your opinion on the pros and cons for some of the most common KPIs below that collectors typically are measured on? 

• CEI
• DSO
• % Paid on time/late
• % Past due balance over X days

Incorporating Sales in the Collection Process
In response to these questions, Nicole Bailey, Accounts Receivable Supervisor at Nine Energy Service, reports that the AR department at Nine Energy Service incorporates its sellers in the collection process as much as possible. “If a client is past due over 30 days from their terms, we loop the sellers in so they can reach out to their contacts or adjust upcoming work if needed,” she says.

“AR and Sales also work together to find specific techniques or set unique terms to improve the organization’s cash flow. “If a customer has a high DSO, we evaluate internally to pinpoint what needs improvement, then coordinate with the customer to help reduce their DSO. This could be requesting payment up front, setting up weekly meetings with sellers, AR, and customers, or adjusting terms to benefit all parties,” she adds.

Along with reducing DSO, Nine Energy Service sellers play a crucial role in resolving billing disputes quickly to maintain relationships and keep the cash flowing in. “The sellers serve as intermediaries between AR and the customer to help explain complex field issues or to negotiate pricing adjustments,” reveals Bailey. “Furthermore, sellers also serve as a healthy balance when pressure is applied from AR during collections to help ensure we maintain a long-term business relationship.”

Taking a Data-Driven Approach

“In our organization, we take a very structured, data-driven approach to integrating Sales into the collections process. Our methodology is built around the principle that Sales and Finance must operate in alignment, with shared visibility and accountability for account outcomes,” responds Lisa Lansaw CICP, Director, NAHC Nidec Motor Corporation. “What follows is our process for collaborating with Sales and setting goals.”

Nidec’s Process Overview:

• Call Cadence: AR holds joint calls with Sales on problem accounts at a frequency determined by the division’s risk profile—weekly, biweekly, or monthly. It is not a one-size-fits-all approach; cadence is dynamically adjusted based on the severity of the division's past-due position, ensuring focus is applied where it is needed most.

• Performance Measurement: Metrics are reviewed monthly, and full dashboard reporting is provided to the C-Suite. Key metrics include:
• Total Past Dues with month-over-month (MoM) and year-over-year (YoY) improvement or degradation.
• DSO with MoM and YoY trends.
• AR Turnover Ratio with trend analysis.
• Collection Effectiveness Index (CEI) with improvement/degradation indicators.
• DSO Gap Analysis, which we consider the most critical real-time indicator of collection effectiveness, is especially valuable as an early alert system during economic or industry disruption periods.

Assigning Collection Goals to Sales:

“At NAHC Nidec Motor Corporation, we have evaluated assigning traditional collection goals to Sales (e.g., CEI, DSO, % Paid on Time),” says Lansaw.. “While we have not formally embedded these into their compensation structures, we absolutely believe Sales must be held visibly accountable through shared dashboards and participation in escalation processes.”

Here’s is Lansaw’s high-level strategic view of the pros and cons of each metric mentioned if directly assigned to Sales:

Strategic Recommendation

Rather than assigning strict financial KPIs to Sales (risking unintended behavior), Lansaw recommends co-ownership through transparency and escalation participation. At Nidec:

• Sales receives access to a live dashboard including the above metrics by customer and portfolio.
• They are required to actively participate in account calls and are part of documented action plans on key accounts.
• Executive Sales leadership is provided division-specific past due trends at month-end to ensure it is seen as a Sales issue, not just a Finance one. (Aging by Sales Person is a powerful tool.)
• Where relationship root causes are identified (e.g., customer dissatisfaction leading to slow pay), they are included as a factor in Sales performance discussions.

Strategic Implication
“This approach drives a better customer experience at Nidec (fewer disputes, less finger-pointing),” says Lansaw. “It protects working capital and aligns incentives without creating toxic dynamics between Sales and Finance. It also creates early-warning indicators for broader organizational risk during disruptive market cycles.”

Other KPIs Worth Considering: 

Bad Debt: Identifies the amount of outstanding debt that is judged uncollectible. Tracking bad debt will help AR look at the effectiveness of collection strategies and credit policies.

Right Party Contacts (RPC) Rate: Tracks the percentage of successful contacts made with the correct individual responsible for payment. A high RPC rate increases the likelihood of successful collection.

Accounts Receivable Turnover: Measures how quickly a company collects its receivables.

Cost per Collection: Identifies the cost associated with each successful collection.

Profit per Account: Identifies the average profit generated from each account being collected. 

Promise to Pay Rate: Tracks the percentage of calls resulting in a customer promising to pay. 

Customer Satisfaction: Measures the customer's experience with the collection process.

Choosing the Right KPIs
When determining which KPIs to use, choose the measurements that will have the biggest impact on your decision-making and will be valuable in helping you reach your goals.

Don’t “over-measure.” Keep things simple. Focus on the key metrics that will provide the most meaningful insights.

A good KPI is one that can be easily measured and tracked over time. The KPI should provide AR with clear guidance on how to identify problems, make informed decisions, and take calculated steps to address them.