{"id":8043,"date":"2021-10-29T22:02:03","date_gmt":"2021-10-29T22:02:03","guid":{"rendered":"https:\/\/thebusinessculture.co.uk\/hey\/what-are-creditors-and-debtors\/"},"modified":"2021-11-02T12:14:25","modified_gmt":"2021-11-02T12:14:25","slug":"what-are-creditors-and-debtors","status":"publish","type":"know-how","link":"https:\/\/thebusinessculture.co.uk\/hey\/know-how\/what-are-creditors-and-debtors\/","title":{"rendered":"What are Creditors and Debtors?"},"content":{"rendered":"<p>If you\u2019re new to running a business, there\u2019s a fair amount of terminology that suddenly applies to your role. We appreciate that it can get pretty confusing and perhaps a little overwhelming at times, which is why we\u2019re dedicated to helping our clients to achieve clarity by explaining these things in no-nonsense language. This time we\u2019re looking at creditors and debtors and how they may affect your business.<\/p>\n<p><strong> <\/strong><\/p>\n<h2><strong>What is a creditor?<\/strong><\/h2>\n<p>Creditors are individuals, businesses and organisations that are owed money by your business. In other words, they have offered you credit that needs to be paid back.<\/p>\n<p>There are two types of creditors:<\/p>\n<ul>\n<li><strong>Loan creditors: <\/strong>These are organisations such as banks, building societies and other financial institutions that have leant you money in some way, like overdrafts, loans and credit cards.<\/li>\n<li><strong>Trade creditors: <\/strong>These are suppliers that you owe money to for services already supplied, such as your IT systems, office furniture and other items that are required in order for your business to run smoothly.<\/li>\n<\/ul>\n<p><strong> <\/strong><\/p>\n<h2><strong>How to manage your credit<\/strong><\/h2>\n<p>When you owe money to a business or organisation, they are the creditor and you are the debtor. There are multiple ways to achieve best practice as a debtor, such as:<\/p>\n<ul>\n<li>Always pay your bills on time.<\/li>\n<li>Make sure to include references where required when making payments (e.g. a PO number, account number or anything else requested by the creditor for their accounts).<\/li>\n<li>If you ever find yourself struggling to pay your creditors, contact them immediately to see if your payment terms can be changed.<\/li>\n<li>Retain documentation of all transactions, as this way you can prove that you\u2019ve made your payments.<\/li>\n<li>Maintain open communication and always reply to your creditors\u2019 enquiries in a timely fashion.<\/li>\n<li>Build and nurture strong working relationships with your suppliers. Recommend them to your clients and send them referrals whenever possible. This will help to keep your reputation strong and could facilitate further collaboration in the future.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What is a debtor?<\/strong><\/h2>\n<p>As briefly mentioned above, a debtor is a person or business that owes another business money. When someone owes your business money, they are therefore your debtor, as they owe you a debt.<\/p>\n<p>Generally speaking, debtors will pay their debts through an agreed payment plan. This could be anything from two to three large lump sums to dozens of smaller payments on a monthly basis over the course of a few years. Interest may be included as part of the deal \u2013 it all depends on who has offered you the goods and services in advance.<\/p>\n<p><strong> <\/strong><\/p>\n<h2><strong>How to manage debt owed to you<\/strong><\/h2>\n<p>Having one or more debtors is a common situation, although it can sometimes lead to cash flow issues if the debts aren\u2019t always paid in full or on time by your debtors.<\/p>\n<p>In the event that a debtor falls on hard times and can\u2019t pay their instalments, what they owe may become a bad debt. This is when the company or individual you extended credit to can\u2019t make the payments now or in the future and the debt has to be written off.<\/p>\n<p>Needless to say, you don\u2019t want to have to write off even a penny owed to you, so here are some ways to minimise the risk of bad debts:<\/p>\n<ul>\n<li>TreyBridge Accountants offers affordable and effective credit control services, chasing the debts on your behalf. This saves you a lot of time and stress, as it can be a very difficult task for many business owners to carry out themselves.<\/li>\n<li>We have an excellent track record of recovering late payments, even those that have been hanging around for a very long time.<\/li>\n<li>Preventing late payments is even better. We offer a credit management system that involves assessing the risk connected to potential customers before you begin a relationship with them. We also recommend how much credit to extend to each one, as this gives you total control over your finances and cash flow management.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>A quick recap<\/strong><\/h2>\n<ul>\n<li>If a business owes you money, they are your debtor.<\/li>\n<li>If you owe a business money, you are their debtor.<\/li>\n<li>If a business has offered you any form of credit, they are your creditor.<\/li>\n<li>If you\u2019ve offered any form of credit to a business, you are their creditor.<\/li>\n<li>The vast majority of businesses are debtors <strong>and<\/strong> creditors, as they will both take out and offer payment plans for goods and services.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Credit control for small businesses<\/strong><\/h2>\n<p>If you have debts owed to you, it\u2019s time to get in touch with TreyBridge Accountants and ask about our credit control services. Call our Yorkshire office on 01482 235575, our London office on 0207 885 0605, or fill in our <a href=\"https:\/\/www.treybridge.co.uk\/contact-us\/\">contact form<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re new to running a business, there\u2019s a fair amount of terminology that suddenly applies to your role. We appreciate that it can get pretty confusing and perhaps","protected":false},"author":12312793,"featured_media":8042,"template":"","know_how_category":[],"class_list":["post-8043","know-how","type-know-how","status-publish","has-post-thumbnail","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know-how\/8043","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know-how"}],"about":[{"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/types\/know-how"}],"author":[{"embeddable":true,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/users\/12312793"}],"version-history":[{"count":1,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know-how\/8043\/revisions"}],"predecessor-version":[{"id":8058,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know-how\/8043\/revisions\/8058"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/media\/8042"}],"wp:attachment":[{"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/media?parent=8043"}],"wp:term":[{"taxonomy":"know_how_category","embeddable":true,"href":"https:\/\/thebusinessculture.co.uk\/hey\/wp-json\/wp\/v2\/know_how_category?post=8043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}