Collection efficiency is the money you received in a period divided by the money that fell due in that period, as a percentage. A builder’s CFO should track it every month for each project, alongside five other numbers: overdue by age, days to collect, cheque bounce rate, the share of buyers who are late, and the lag between a milestone and its demand.
One ratio on its own hides too much. A project can show 90% efficiency while a handful of large buyers sit six months overdue, or while demands go out three weeks after the slab was cast. The six numbers below, read together, tell you where the cash is stuck and why.
How is collection efficiency calculated?
Use the amounts that actually fell due, not everything you invoiced:
Collection efficiency = collections received in the period ÷ (overdue at the start of the period + demands that fell due in the period) × 100
Two rules keep the number honest:
- Count a demand only once its due date has passed. A demand raised on the 28th with a 15-day due date belongs to next month’s denominator, not this month’s.
- Carry overdue amounts forward. If you only compare this month’s receipts with this month’s demands, old arrears vanish from the ratio and a project with a growing backlog can look healthy.
Some CFOs also keep a current efficiency that leaves out the overdue carried in. It shows how buyers responded to the latest demand. Keep both, and label them clearly in the report.
A worked example (sample figures)
A sample project of 120 flats on a construction-linked plan raises its 7th-slab demand in October. All figures are illustrative.
| Item | Amount (₹ lakh) |
|---|---|
| Overdue at 1 October | 62 |
| Demands that fell due in October | 410 |
| Total due | 472 |
| Received in October against these | 398 |
| Collection efficiency | 84.3% |
| Current efficiency (398 − 40) ÷ 410 | 87.3% |
Of the ₹398 lakh received, ₹40 lakh cleared old arrears, so ₹358 lakh came in against October’s ₹410 lakh. Overdue at 1 November is 472 − 398 = ₹74 lakh, up from ₹62 lakh. The headline 84% looks acceptable; the rising overdue says the trend is not.
Which six numbers should a CFO track?
| KPI | What it measures | Read it with |
|---|---|---|
| Collection efficiency | Cash received against cash that fell due | Overdue trend |
| Overdue by age | Amounts late by 0–30, 31–60, 61–90 and 90+ days | Buyer count in each band |
| Days to collect | Average days from demand date to cleared receipt | Due period in the plan |
| Bounce rate | Cheques and mandates that bounced, by count and by value | Repeat bouncers |
| Buyers overdue | Share of active bookings with any amount past due | Overdue by age |
| Milestone-to-demand | Days from a certified construction stage to its demand | Site progress reports |
Overdue by age
Group overdue amounts by how late they are. The 90+ band is where cancellations, disputes and write-offs come from, so watch its total and the number of buyers in it. A band that holds one large buyer needs a phone call; a band that holds forty small ones needs a process fix.
Days to collect
Average the days between the demand date and the date the money cleared in the bank (not the cheque date). If the plan gives buyers 15 days and the average is 32, most buyers are paying after the first reminder, which tells you the reminder, not the demand, is doing the work.
Bounce rate
Count bounced cheques and failed mandates as a share of all instruments presented, by number and by value. Keep a list of buyers who bounced more than once: they are the best early sign of a booking at risk.
Share of buyers overdue
This is the count of bookings with any overdue amount divided by all active bookings. It moves before the money does. If it rises from 12% to 20% in a quarter, collections will fall next quarter even if this quarter’s cash looked fine.
Milestone-to-demand lag
Measure the days between the engineer certifying a stage and the demand going out. Every day of lag is a day of interest-free credit you gave the buyer. On a ₹400 lakh demand, a 20-day lag at a 10% annual cost of funds costs about ₹2.2 lakh: 400 × 10% × 20 ÷ 365. That is a sample figure; use your own borrowing rate.
How to run the monthly review
- Close the bank reconciliation first, so every receipt is matched to a cleared credit.
- Freeze the month: demands with due dates in the month, and overdue carried in.
- Produce the six numbers per project, with the previous three months beside them.
- List the ten largest overdue buyers with their last contact and next step.
- Note any demand still waiting on a certified milestone and why.
The review fails when step 1 is skipped. If receipts are not matched to bank credits, bounced cheques count as collections until someone notices, and the ratio is overstated for weeks.
Where these numbers come from in LoftRay
LoftRay raises demands from certified construction milestones, records receipts with bounce and clearance, and reconciles them against imported bank statements (CSV, Excel or MT940). The overdue summary, ageing and buyer statements come from the same records, and the report builder saves a monthly view per project. LoftRay calculates interest on late payment from the rules you approve during setup. It does not send reminders by WhatsApp, SMS or email yet; reminder letters are drafted for your team to send.