What is a debtor?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A debtor is a person or business that owes money to a business, most often a customer who has received goods or services and been invoiced but has not yet paid. Those unpaid customer invoices are usually shown as accounts receivable, a current asset on the balance sheet, until they are paid or otherwise settled.
Each customer who buys on account has a running balance in the books: invoices raised, payments received and the amount still outstanding. Sending customers a regular statement of that balance gives them a chance to query anything that does not match their own records.
Unpaid customer invoices are not cash available to spend. A growing debtors total can leave a business that is making a profit short of cash, which is why the list is worth reviewing regularly, starting with the oldest amounts.
In Australia
business.gov.au defines a debtor simply as a person or business that owes you money, and a bad debt as money that is unlikely to be paid in the near future. Its page on record keeping counts lists of debtors among the end-of-year records a business needs to keep.
Its advice on improving cash flow says managing your invoicing and debtors helps you get paid sooner and prevent bad debts. It suggests invoicing earlier, updating payment terms to encourage upfront or early payment, and chasing up customers who have not paid.
Its glossary describes factoring, where a factor company buys a business's outstanding invoices at a discount and chases up the debtors itself, as a quick way to get cash that can be expensive compared with traditional finance. Its cash flow statement template lists debtor receipts as one form of cash coming in.
Worked example
| Customer | Not yet due (AUD) | Overdue (AUD) | Total owed (AUD) |
|---|---|---|---|
| Customer A | 1,650.00 | 1,650.00 | |
| Customer B | 820.00 | 1,100.00 | 1,920.00 |
| Customer C | 475.00 | 475.00 | |
| Total | 2,470.00 | 1,575.00 | 4,045.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Applying a customer's part-payment to the wrong invoice, so an old debt looks paid while a newer one looks overdue.
- Leaving disputed amounts in the debtors list without a note, which overstates what the business expects to collect.
- Counting money that debtors owe as cash available to pay this week's bills.
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.
- Improve your cash flow
business.gov.au, Australian Government. Current at 16 October 2026, released 20 May 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Set up a cash flow statement
business.gov.au, Australian Government. Current at 15 October 2026, released 22 May 2025. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.