Who or what is a creditor?
A creditor in finance is also called a creditor who has a claim or a receivable. Any individual or legal entity, as well as any company that supplies goods or provides services, becomes a creditor.
Examples of creditors are:
- Banks that give credit
- Suppliers who deliver materials/products
- Agencies that provide certain services, such as online marketing
- The tax office, which levies taxes based on legal requirements.
Creditors assume an accounts payable risk.
This is because in most cases they make advance payments. To keep this risk as low as possible, a retention of title is often agreed in practice.
We also find the term creditor in accounting. The so-called accounts payable is a sub-branch of financial accounting, it deals with the debts/expenses of a company. This involves tasks such as processing incoming invoices and credit notes (checking, recording, account assignment, archiving), initiating payments and maintaining vendor master records. In addition, the accounts payable department is responsible for the dunning process, travel expense reports and much more.
Vendor master record maintenance is the main part of the accounts payable department. Here, all general data of the creditors are recorded and always kept up to date. In addition, each vendor is assigned an identification number, the so-called vendor number, which enables a quick search in the system. With good vendor master record maintenance and ensuring that open items are paid when due, a good relationship can be established between the company and the vendor.