Short-Term Notes Payable

This is exactly a ‘mirror image’ of a Short-Term Notes Receivable. Short-Term Notes Receivable are debt contracts (promissory notes) that mature within one year (i.e., in the next accounting period). They are used mostly to restructure accounts receivable that are in default into regular debt contracts with interest (sometimes pretty steep) and installment payments.

Which means that if you happen to default on your Accounts Payable, you might have to restructure into these obligations into a Short-Term Note Payable.

Some companies may offer their customers a choice between paying cash upfront or signing a promissory note and paying interest. Which compensates a company for risks incurred. In the latter case, you have to perform a thorough financial analysis to choose the best option for you in terms of financial value generation.