Business

Difference Between Debtors and Creditors

Main difference

Maintaining the supply-demand loop is a tedious task for companies by taking on business risk at the same time. To get their business up and running, retailers need to have the wide range of products available on their shelves all the time. Meeting high demand often becomes difficult for the retailer as it involves a large outlay of cash on a daily basis. To overcome the problem of supply and demand, companies buy products on credit and ensure that their sales and customers are not affected by the unavailability of cash. Companies, retailers or individuals who buy goods on credit are called debtors. At the same time, companies, retailers or individuals who deliver goods on credit to debtors are known as creditors. The credit facility is provided by the creditor taking into account the reputation of the debtor in the market; the debtor also incurs some interest in this type of business relationship.

Comparison chart

debtors Creditors
Definition Companies, retailers, or individuals who buy goods on credit are called debtors. Companies, retailers, or individuals who provide assets on credit to debtors are known as creditors.
Interest The debtor incurs some interest in this type of business relationship. The creditor also imposes a certain interest rate that is directly linked to the time specified for the repayment of the credit.
Influence less influence More influence when setting terms and conditions
Capital Plus Less

What are debtors?

Debtors are companies, individuals or retailers who receive goods or other services from the creditor on credit. The contract and the official signature also occurs between the two, and it is also noted that when the debtor will be returning the amount. The debtor also incurs the interest rate; and in the case of non-payment within the term, the interest rate increases. Those debtors who have a good reputation in the market and a good history of repaying credit on time are appreciated and are offered the best possible services. The businessman or company turns out to be the debtor after not having a large amount of money to execute different operations and ensure the availability of all kinds of products. The debtors also treat the matter by the priority of the claim; next, The products or goods that have the highest sales or demand among the client are bought on credit at the beginning. The move is initiated so that high demand goods for sale are sold sooner and makes the credit repayment process quite convenient for them. The word “debtor” is derived from the Latin word “debere”, which means “owe”. If the debtor becomes insolvent due to any of the adverse incidents, the minimum amount is taken and that too at different time intervals. which means “duty”. If the debtor becomes insolvent due to any of the adverse incidents, the minimum amount is taken and that too at different time intervals. which means “duty”. If the debtor becomes insolvent due to any of the adverse incidents, the minimum amount is taken and that too at different time intervals.

What are creditors?

The creditor is the solid company, the individual or the wholesaler that offers the product on credit to the debtors. It is worth mentioning that the creditor has a large capital or maintains a strong relationship with the different multinational companies. With the correct use of his money, the creditor provides the wide range of goods to the debtor on credit. The creditor also imposes a certain interest rate that is directly linked to the time specified for the repayment of the credit. The creditor also offers discounts for early payment to debtors who pay back the money in a short time. When the term and conditions are fixed between both parties, the creditor informs in detail about the discounts for prompt payment and the payment programs.

Debtors vs creditors

  • Companies, retailers, or individuals who buy goods on credit are called debtors. At the same time, companies, retailers or individuals who deliver goods on credit to debtors are known as creditors.
  • The word “debtor” is derived from the Latin word “debere”, which means “owe”.
  • The debtor incurs some interest in this type of business relationship.
  • The creditor has more influence in setting the terms and conditions compared to the debtor.
  • The creditor has more capital available than the debtor.
  • The creditor also imposes a certain interest rate that is directly linked to the time specified for the repayment of the credit. The creditor also offers discounts for prompt payment to debtors who pay back the money in a short period of time.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button