What are debtors?

Debtors are the customers who owe your business money for invoices you have issued but they have not yet paid. The total is an asset on the balance sheet, but it is not cash until it arrives.

A plain-English definition for UK small businesses, not tax advice. Where a figure changes at a Budget, check gov.uk or ask your accountant.

LAST REVIEWED 29 AUGUST 2026 · BIZZLE

Why do debtors matter so much?

Because a sale on credit is a sale in the profit and loss account and nothing in the bank. Every invoice you raise adds to debtors; every payment received takes it away. The figure at any moment is the money you have earned but cannot yet spend.

Debtors are where profitable businesses die. If customers take 60 days to pay and your suppliers and staff want paying in 30, the difference comes out of your bank account until the invoices are settled. Grow quickly and the gap grows with you.

The two things to know about your debtors are how much and how old. The aged debtors report answers both: who owes what, and whether it is a week overdue or a quarter. Chasing is easier the sooner it starts, and a debt that goes unchased for months is on its way to becoming a bad debt.

A worked example

A plumber has three invoices outstanding at the end of the month: £850 raised last week and not yet due, £2,300 raised six weeks ago and twenty days overdue, and £400 raised in the spring, now 65 days overdue. Debtors are £3,550.

His profit and loss shows a good month. His bank balance is £900, and wages of £1,400 are due on Friday. He is profitable and cannot pay his staff.

The £2,300 needs a firm reminder today, with a statement attached. The £400 needs a phone call and a decision about whether it is ever coming. Neither happens if the report is not looked at.

What do people get wrong?

  • Counting debtors as money. It is a promise, and some promises are not kept.
  • Not chasing until the debt is old, when the customer has long since forgotten the job.
  • Not having the invoice date and terms on the invoice, so there is nothing to chase against.
  • Leaving a bad debt in the figure for years, which flatters the balance sheet and hides the loss.

TERMS USED ON THIS PAGE

profit and loss accountinvoiceaged debtorsbad debtbalance sheetAll terms →

COMMON QUESTIONS

Questions people ask.

Are debtors an asset?

Yes. Money owed to you by customers is a current asset, because you expect to receive it within a year. It sits on the balance sheet alongside cash and stock, but unlike cash it depends on someone else paying.

What is the difference between debtors and accounts receivable?

Nothing, in practice. Accounts receivable is the term more common in software and in American usage; debtors is the traditional UK term. Both mean the total of unpaid customer invoices.

How long should I give a customer to pay?

Whatever your invoice says, and the invoice should say something. Thirty days is common; fourteen or seven is perfectly reasonable for small jobs. If no terms are agreed, the law treats 30 days as the default for business customers.

When does a debtor become a bad debt?

When you conclude it will not be paid: the customer has gone bust, vanished, or refused and you decide not to pursue it. At that point it is written off as a cost, and VAT already paid on it can be reclaimed once the debt is six months overdue.

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