Lorem ipsum
Lorem ipsum
More control and less work. Even in your industry.
Fast and secure invoice processing for every organisation.
Fast and secure invoice processing for every organisation
The possibilities of our platform
A creditor is an individual, business, or financial institution that provides goods, services, or loans on credit. In other words, a creditor is an entity to whom your business owes money.
Effectively managing creditors is essential for maintaining a healthy cash flow and avoiding late payment penalties. Timely payments help businesses build strong relationships with suppliers and lenders while preventing unnecessary financial strain.
Table of contents
Creditors and debtors are often mistaken for one another, but they represent opposite financial transactions:
Example: Suppose you purchase office supplies from a supplier on credit. In this case, you are the debtor because you have an outstanding payment. Conversely, if your business issues an invoice to a client who has yet to pay, that client is your debtor.
Understanding this distinction is essential for accurate bookkeeping and financial planning.
Check out our article on the difference between creditors and debtors for a more detailed explanation.
On a balance sheet, creditors are recorded under liabilities because they represent outstanding payments owed by a business. There are two main types:
| Assets | Liabilities | ||
|---|---|---|---|
| Fixed Assets | Equity | ||
| Property | 100,000 | Capital Investment | 50,000 |
| Equipment | 40,000 | Retained Earnings | 20,000 |
| Vehicles | 30,000 | Profit Balance | 10,000 |
| Current Assets | Long-Term Liabilities | ||
| Inventory | 20,000 | Business Loan | 75,000 |
| Accounts Receivable (Debtors) | 16,000 | ||
| Liquid assets | 30,000 | Short-Term Liabilities | |
| Bank Balance | 60,000 | Accounts Payable (Creditors) | 20,000 |
| Taxes Payable | 5,000 | ||
| Total Assets | 276,000 | Total Liabilities | 276,000 |
Creditor days is a financial metric that measures the average time a business takes to pay its creditors. This helps businesses monitor their cash flow efficiency and assess payment habits.
The formula to calculate this is: Creditor days = (average accounts payable / total credit purchases) * 365.
Example calculation:
Average accounts payable: €50,000
Total credit purchases: €200,000
Creditor days calculation: (€50,000/€200,000) x 365 = 91.25 days.
A higher creditor days figure indicates that a business takes longer to pay suppliers, while a lower figure suggests prompt payments. Efficient creditor management helps maintain good supplier relationships and ensures a healthy working capital cycle.
Read our article “How to Calculate Debtor Days” for a detailed explanation.
Managing creditors efficiently is essential for strong cash flow and financial stability. Payt provides an automated solution to help businesses streamline creditor and debtor management while improving payment tracking and communication.
With Payt, businesses save up to 80% of their administrative time and ensure invoices are paid 30% faster.
Discover how Payt can optimise your creditor management today.
A creditor in accounting refers to an entity that has provided goods, services, or loans on credit and is awaiting payment.
Creditors are listed under liabilities on a balance sheet, representing outstanding payments a business owes to suppliers or lenders.
In business, a creditor is any party that has extended credit to a company, requiring payment at a later date.
