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What is the meaning of debtor and creditor?

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Updated on: July 29, 2025
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A creditor is a party you owe money to. A debtor is someone who owes you money. The difference between a creditor and debtor lies in the direction of the payment.

In this article, you’ll learn the full debtor and creditor meaning, where each appears on the balance sheet, typical payment terms, and how to manage both efficiently.

Table of contents:

  1. What are debtors and creditors?
  2. Where do debtors and creditors appear on the balance sheet?
  3. What is the average payment term for debtors and creditors?
  4. How Payt helps you manage debtors and creditors
  5. Frequently asked questions about debtors and creditors

What are debtors and creditors?

AttributeDebtorCreditor
RelationshipCustomerSupplier
Cash flowIncomingOutgoing
Balance sideAssetLiability
RiskLate or no paymentLate fees/penalties

A debtor is a customer who still owes you payment. A creditor is a supplier you still need to pay.

A helpful debtor- creditor mnemonic:
D for Debtor = Delivers payment to you
C for Creditor = Cash goes from you to them

These terms are essential in financial administration. They help you understand how much money you are yet to receive (debtors) and how much you still owe (creditors). Understanding the creditor vs. debtor relationship is key to keeping your cash flow healthy.

Where do debtors and creditors appear on the balance sheet?

Debtors are listed on the asset side of the balance sheet—they represent expected incoming payments. Creditors are listed under liabilities—they represent your company’s outstanding debts to suppliers.

Example balance sheet:

AssetsAmountLiabilitiesAmount
Bank€ 5,000Equity€ 10,000
Debtors€ 7,500Creditors€ 2,500
Inventory€ 3,000
Total€ 15,500Total€ 15,500

This layout makes the creditor debtor meaning visually clear and easy to understand.

What is the average payment term for debtors and creditors?

In most countries, the average payment term for debtors is around 30 days, but it can often stretch to 40–45 days. This delay can impact your company’s cash flow.

Creditors usually have similar payment terms, though some businesses negotiate up to 60 days to maintain liquidity. Knowing who is debtor and creditor in your accounts helps you stay in control.

How Payt helps you manage debtors and creditors

Efficient debtor and creditor management is vital for any healthy business. Outstanding invoices can lead to liquidity issues, and late payments to suppliers can damage your reputation or result in penalties.
With Payt, you can manage your debtors and creditors clearly, automatically, and personally. You’ll have real-time insights, automated reminders, and smooth communication with both customers and suppliers.

Benefits of using Payt:

  • Faster payments: Get invoices paid 30–50% faster
  • Time-saving: Cut manual tasks by up to 80%
  • Better customer experience: Clear communication and easy payment options
  • Full control: Decide when and how to send reminders
  • Security first: ISO 27001 certified and continuously monitored

Want to learn more? Download our brochure or book a free demo.

Frequently asked questions about debtors and creditors

Accounts receivable refers to debtors—customers who owe you money for products or services delivered.

Yes, a debtor can sue a creditor in cases of unlawful collection practices or contract violations.

In bankruptcy, debtors may have debts reduced or forgiven, while creditors must follow legal procedures to recover what they’re owed.

A supplier is a creditor—they’ve provided goods or services to you that you still need to pay for.

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By Aida Kopijn

Aida is an accounts receivable management expert at Payt, known for her precision and organisational passion. She ensures every process is perfectly managed and optimised.

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