A creditor is a person or organisation to whom money is owed by the business. Creditors can be suppliers, lenders, or any one providing credit to the business. They are typically classified as current (to be paid within one year) or non-current (due after more than a year). Effective creditor management is essential for maintaining good supplier relationships and cash flow.


Example: A construction company owes £50,000 to a supplier for building materials. The supplier is classified as a creditor until the company settles the payment. The construction company also owes £100,000 in loans to a bank, which is another form of creditor. Managing these creditor obligations is crucial to maintaining cash flow.