A trade creditor is a supplier who has sent you an invoice for the purchase of goods or services but has not yet been paid.
The total amount owed to trade creditors is a current liability. It appears on the balance sheet as part of Creditors either due within one year or after one year, if a special arrangement has been made with a supplier. Trade creditors also include VAT (if you are VAT registered).
Why are Trade Creditors important?
Trade creditors are important for two reasons:
- It is an additional source of finance for a business. If a business is experiencing cash flow problems, it can slow up the payment of trade creditors to keep cash in the bank for longer.
- If a new supplier is considering offering credit terms to your business, they may review your accounts available on Companies House to assess the ability and speed at which you may pay them, commonly Creditor Days to assess this.