Total cost to perform the processes "process accounts receivable (AR)", "manage and process collections", and "manage and process adjustments/deductions" per process FTE

This measure calculates total cost per process full time equivalent (FTE), to perform the processes "process accounts receivable (AR)", "manage and process collections", and "manage and process adjustments/deductions". Total cost is the sum of personnel (compensation/benefits), systems (direct and/or allocated), overhead (direct and/or allocated), other internal, and outsourced costs. The Process "process accounts receivable (AR)" includes [Processing payments due from customers. This includes all processing of funds received, whether by check or electronically. This does not include the generation of invoices.]. The Process "manage and process collections" includes [Posting entries to respective accounts, and preparing accounts for receivables. Manage the cash collected by the business from its debtors. Record it in the books of accounts to provide clear information about the availability of the cash.]. The Process "manage and process adjustments/deductions" includes [Creating and providing funds for necessary adjustments and deductions, including all expenses that were required for the business at certain point in time.]. This Cost Effectiveness measure is intended to help companies understand this cost expenditure related to the process group "Perform revenue accounting".

Benchmark Data


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Measure Category:
Cost Effectiveness
Measure ID:
Total Sample Size:
1,965 All Companies
Key Performance

Compute this Measure

Units for this measure are dollars.

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(Total cost to perform the process "process accounts receivable (AR)" + Total cost to perform the process "manage and process collections" + Total cost to perform the process "manage and process adjustments/deductions") / (Number of FTEs who perform the process "process accounts receivable (AR)" + Number of FTEs who perform the process "manage and process collections" + Number of FTEs who perform the process "manage and process adjustments/deductions")

Key Terms

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Process Cost Components

Total cost for a process, process group, or function consists of the following five components.

Internal/In-house operating cost consists of the first four components (personnel, systems, overhead, and other).

Personnel Cost

Personnel cost is the cost associated with personnel compensation and fringe benefits of employees (i.e., those classified as FTEs which includes both full-time and salaried/hourly employees) contributing to each respective process. Personnel cost should include all of the following costs.

Employee Compensation: Includes salaries and wages, bonuses, overtime and benefits.

Fringe: Includes contributions made towards the employees' government retirement fund, workers compensation, insurance plans, savings plans, pension funds/retirement plans, and stock purchase plans. This should also include special allowances, such as relocation expenses and car allowances.

Systems Cost

Systems costs include all expenses, paid or incurred, in conjunction with:
Computer hardware or computer software acquired by the organization or provided to the organization through service contracts.

Any related costs to process, service and maintain computer hardware or computer software. The costs of providing and maintaining services for each applicable process (e.g., computer system(s) processing (CPU) time, network/system communication charges, maintenance costs for applications and data storage). This includes the costs related to LANs, WANs, etc. This does not include one-time costs for major new systems developments/replacements. Consultant fees should not be included in depreciation of new system implementations. Include only those costs that occur more than six (6) months after implementation, as normal system maintenance costs. Any systems cost (e.g., maintenance) which is outsourced to a third party supplier should be captured in the separate cost category labeled outsourced cost.

Systems cost should include all salaries, overtime, employee benefits, bonuses or fees paid to full-time, part-time or temporary employees or independent contractors who perform services relating to computer hardware, computer software, processing or systems support.

Overhead Costs

For the purpose of this study, provide the total actual overhead costs for the year related to the specified process. These are costs that cannot be identified as a direct cost of providing a product or a service. Include the primary allocated costs such as occupancy, facilities, utilities, maintenance costs, and other major costs allocated to the consuming departments. Exclude systems costs that are allocated, since these will be captured separately as systems cost.

Other Cost

Other costs are costs associated with the specified process, but not specifically covered in personnel cost, systems cost, overhead cost and outsourced cost in this questionnaire. These other costs include costs for supplies and office equipment, travel, training and seminars. Include the cost of telephones, except for that portion captured in systems cost.

External/Outsourced Cost

In determining outsourced cost, include the total cost of outsourcing all aspects of the specified process to a third-party supplier. Exclude one-time charges for any type of restructuring or reorganization. Outsourced costs should also include costs for intracompany outsourcing (i.e., reliance on a shared services center or other business entity).

FTE - (full-time equivalent employee)

To calculate the number of full-time equivalents employed during the year for each respective process or activity, you must prorate the number of employees and the hours spent performing each process/activity. Assume that a full-time worker represents 40 hours per week. Provide the average number of full-time equivalents employed during the year for each respective process. Include full-time employees, part-time employees, and temporary workers hired during peak demand periods. Allocate only the portion of the employee's time that relates to or supports the activities identified for an applicable process. Prorate management and secretarial time by estimating the level of effort in support of each activity, by process.

For example, a part-time secretary in the finance department for XYZ, Inc. charges all of his time to finance department activities. He works 20 hours per week. The secretary splits his time evenly supporting employees working in the general accounting process and the financial reporting process. Thus, his time should be allocated by process. So, if he works throughout the year and supports these two processes, his time would be split evenly as:

20hrs/40hrs = .5FTE * 50% for general accounting = .25FTE for general accounting

20hrs/40hrs = .5FTE * 50% for financial reporting = .25FTE for financial reporting

Cost Effectiveness

Cost effectiveness measures are those in which two related variables, one of which is the cost and one of which is the related outcome related to the expenditure are used to determine a particular metric value.

Measure Scope

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Cross Industry (7.3.1)

  • 9.2.1 - Process customer credit (10742)
    • - Establish credit policies (10789)
    • - Analyze/Approve new account applications (10790)
    • - Analyze credit scoring history (14187)
    • - Forecast credit scoring requirement (14188)
    • - Review existing accounts (10791)
    • - Produce credit/collection reports (10792)
    • - Reinstate or suspend accounts based on credit policies (10793)
  • 9.2.2 - Invoice customer (10743)
    • - Maintain customer/product master files (10794)
    • - Generate customer billing data (10795)
    • - Transmit billing data to customers (10796)
    • - Post receivable entries (10797)
    • - Resolve customer billing inquiries (10798)
  • 9.2.3 - Process accounts receivable (AR) (10744)
    • - Establish AR policies (10799)
    • - Receive/Deposit customer payments (10800)
    • - Apply cash remittances (10801)
    • - Prepare AR reports (10802)
    • - Post AR activity to the general ledger (10803)
  • 9.2.4 - Manage and process collections (10745)
    • - Establish policies for delinquent accounts (10804)
    • - Analyze delinquent account balances (10805)
    • - Correspond/Negotiate with delinquent accounts (10806)
    • - Discuss account resolution with internal parties (10807)
    • - Process adjustments/write off balances (10808)
    • - Perform recovery workout (14007)
    • - Manage default accounts (14008)
  • 9.2.5 - Manage and process adjustments/deductions (10746)
    • - Establish policies/procedures for adjustments (10809)
    • - Analyze adjustments (10810)
    • - Correspond/Negotiate with customer (10811)
    • - Discuss resolution with internal parties (10812)
    • - Prepare chargeback invoices (10813)
    • - Process related entries (10814)