Note payable and account payable: key differences for SMEs


KPay

17 October 2024

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What is an account payable?

What is note payable?

The difference between accounts payable and note payable

 Account payableNote payable
DefinitionShort-term debt incurred by a company from purchasing goods and services from its suppliers.Long-term debt that a company pays to its suppliers or lending institutions.
TimeRepayment is due within 30 or 60 days after receiving the goods.Typically has specific terms and periods, classified as short-term (one year or less) or long-term (more than one year).
Interest/
Collateral
No interest is charged, and early payment discounts may be offered. As a short-term loan, no collateral is required. As long as invoices are paid on time, suppliers will continue to provide services.A written promise must be signed as a guarantee of the repayment terms. The note includes the principal amount issued by the lender, interest payable, payment schedule, collateral, and its terms. This information is all incorporated into a formal lending agreement between the borrower and the lender.

What is a long term note payable?

Consequences of not properly recording accounts payable and notes payable

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