Allianz Trade Clarifies 'Trade Debtors' Concept for Businesses
Allianz Trade has issued guidance clarifying the meaning of trade debtors for businesses. The material explains the difference between debtors and creditors and how to manage cash flow.
Allianz Trade, a global expert in business insurance, has released content to clarify the concept of trade debtors for companies.
A trade debtor is defined as a customer who has not yet paid for goods or services and is therefore in debt to the business. These debts are listed as current assets on a company's balance sheet, assuming they will be settled by their due date. The opposite of trade debtors are trade creditors, which are entities to whom the company itself owes money.
The guidance highlights that a high number of 'debtor days' can lead to cash flow issues. Allianz Trade offers trade credit insurance to protect businesses' accounts receivable from trade debtors who default on their payments.
Furthermore, the material explains how to calculate average trade debtor days using the formula: receivables divided by annual sales, multiplied by 365 days. This helps assess how quickly a business collects payments from its customers. The calculation for creditor days is also presented.