Trade debtors
Trade debtors are invoices customers owe you for goods or services sold on credit. Here's how they work.
Published Friday 24 July 2026
Table of contents
Key takeaways
- Trade debtors are the invoices your customers owe you for goods or services you've sold on credit. They're also known as debtors or accounts receivable.
- Trade debtors sit on your balance sheet as a current asset, while trade creditors are a current liability because they're what you owe suppliers.
- Debtor days show how long it takes to collect payment, and lower debtor days mean cash reaches your account sooner.
- Clear payment terms, prompt invoicing and steady follow-up help you keep trade debtors down and protect your cash flow.
What are trade debtors?
Trade debtors are the amounts your customers owe you for goods or services you've delivered but not yet been paid for. You'll also hear them called debtors or accounts receivable, and the term can also refer to the customers themselves who owe you money.
Trade debtors and trade creditors are two sides of the same transaction. If you sell on credit and invoice a customer, that amount is part of your trade debtors. In your customer's records, the same amount is part of their trade creditors, because it's money they owe you.
Trade debtors vs trade creditors
The difference comes down to which way the money flows. Trade debtors are money owed to you, while trade creditors are money you owe others.
- Trade debtors: money owed to you by customers, recorded as a current asset
- Trade creditors: money you owe suppliers for goods or services bought on credit, recorded as a current liability
Keeping an eye on both sides helps you see whether cash is coming in fast enough to cover what you need to pay out.
Trade debtors on the balance sheet
On your balance sheet, trade debtors are recorded as a current asset because you expect to convert them into cash, usually within a year. They sit alongside other current assets like cash and stock.
If you're registered for VAT, the trade debtors figure is shown inclusive of VAT. That's because it reflects the full amount the customer actually pays you, not just the value of the goods or services.
How to calculate debtor days
Debtor days tell you the average number of days it takes to collect payment from your customers. You work it out by dividing your trade debtors by your annual credit sales, then multiplying by 365.
Here's how the calculation works for a business with €30,000 in trade debtors and €320,000 in annual credit sales.
- Take your trade debtors figure: €30,000.
- Divide it by your annual credit sales: €30,000 ÷ €320,000 = 0.094.
- Multiply the result by 365: 0.094 × 365 = 34 days.
So this business collects payment in about 34 days on average. Lower debtor days mean you're collecting cash faster, which keeps more money available to run and grow your business.
How to manage and reduce trade debtors
Managing trade debtors well keeps cash moving into your business and reduces the risk of unpaid invoices. A few simple credit-control habits make a big difference.
- Set clear payment terms before you start work
- Run credit checks on new customers
- Invoice promptly and accurately
- Follow up on overdue amounts
- Offer early-payment discounts
Slow payment is common, so it helps to know what's normal in your market. Days Sales Outstanding (DSO) in Ireland is around 50 days, and small and medium businesses often wait around 60 days, according to Allianz Trade.
What happens if a trade debtor doesn't pay?
When an invoice stays unpaid past its due date, it becomes part of your aged debtors, which groups outstanding amounts by how overdue they are. If it can't be recovered, you may eventually write it off as a bad debt.
Writing off a bad debt reduces your profit, so it's worth acting early. Staying on top of overdue invoices protects your cash flow and helps you avoid losses.
Keep on top of your trade debtors with Xero
Tracking every invoice and knowing who owes you makes it easier to get paid on time and keep cash flowing. See your outstanding invoices in one place with Xero and get one month free.
FAQs on trade debtors
Here are answers to some frequently asked questions about trade debtors to help you put the term into practice.
Are trade debtors an asset?
Yes, trade debtors are a current asset on your balance sheet because you expect the money to reach your account within a year. They represent future cash you've already earned.
Do trade debtors include VAT?
If you're registered for VAT, your trade debtors figure includes VAT because it shows the full amount the customer will pay. The VAT portion is money you collect on behalf of Revenue.
What is the difference between trade debtors and debtors?
Trade debtors are amounts owed specifically from selling your goods or services on credit. Debtors is a broader term that can also include money owed from other sources, such as loans or refunds.
How can I reduce my trade debtor days?
Invoice as soon as the work is done, set shorter payment terms and follow up quickly on overdue amounts. Offering an early-payment discount can also encourage customers to pay sooner.
Related terms
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.