What is a creditor?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A creditor is a person or business that a business owes money to. Most creditors are suppliers that have delivered goods or services on agreed payment terms, but lenders, landlords and credit card providers can be creditors too. Amounts owed to creditors are liabilities, and those owed to suppliers make up accounts payable.
Each supplier a business buys from on account has its own record in the books, showing the bills received, the payments made and the balance still owing. Added together, those supplier balances give the accounts payable figure on the balance sheet.
A creditors list sorted by due date shows what has to be paid and when, which feeds straight into cash flow planning. Comparing each supplier's statement with your own record of what you owe them picks up missing bills, bills entered twice and payments applied to the wrong bill.
In Australia
business.gov.au defines a creditor in two ways: a person or business you buy from under an agreement to pay later, and anyone you owe money to, such as a lender or supplier. Its page on record keeping counts lists of creditors among the end-of-year records a business needs to keep.
Its guide to managing cash flow suggests negotiating payment terms with suppliers, such as asking for longer to pay so the business can hold on to its cash. It also names delaying supplier payments, alongside struggling to pay bills and relying on credit, as signs that cash flow may be under pressure.
Worked example
| Creditor | Type | Amount owed (AUD) |
|---|---|---|
| Packaging supplier | Supplier on account | 1,320.00 |
| Courier service | Supplier on account | 410.00 |
| Business credit card | Credit card provider | 960.00 |
| Equipment finance | Lender | 7,500.00 |
| Total owed to creditors | 10,190.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Paying from a supplier's statement without checking it against the bills already recorded, which can pay the same bill twice.
- Leaving lenders and credit card providers off the creditors list, so it understates what the business owes.
- Letting a supplier's credit note sit unused instead of applying it to the balance owed to that supplier.
Related terms
Related service
Accounts payable and receivable
Bills and invoices tracked, with you approving every payment.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Record keeping
business.gov.au, Australian Government. Current at 15 October 2026, released 7 November 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Guide to managing cash flow
business.gov.au, Australian Government. Current at 15 October 2026, released 22 December 2025. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.