Outstanding Check: Definition, Risks, and Ways to Avoid

Be mindful of post office conditions and potential delays for seasonality, weather, or staffing issues. Last, outstanding checks might have an impact on management of the cash flow. Outstanding checks also have the risk of being used in fraudulent conduct. Someone else could be able to change the payee name or the amount if a check is misplaced or stolen before it is taken to the bank. All else being equal, it is safest if a check is deposited as fast as possible to avoid tampering with the instrument. Usually, you will print this report as part of your bank reconciliation before you begin clearing checks.

• Under Minnesota’s Unclaimed Property Laws, uncashed and returned checks must generally be reported to the Minnesota Department of Commerce after three years.
• One state is that the payee has the check but hasn’t deposited or cashed it.
• If you cannot find the issuer, consult your state’s abandoned property program to claim assets.
• For example, payments may show as being paid but if the cash has not yet been debited from the account, there may be inconsistencies worth reconciling.
• The payee cannot cash or deposit the check once a stop payment has been issued.The payer’s bank has no way of knowing that a check has been written until the payee deposits or cashes the check.
• You can also call or write to remind the payee that the check is outstanding.

Some businesses print “Void after 90 days” on their checks to encourage recipients to deposit checks more promptly. Most banks will continue to honor checks for the full 180 days, but that isn’t guaranteed. To prevent problems, you should cash or deposit a check promptly after receiving it. Like business checks, personal checks are generally considered invalid after six months (180 days). Outstanding personal checks can cause budgeting problems, but you may have an easier time reminding a friend or family member to cash a check than a business payee. If a payee receives a check and does not present it for payment at once, there is a risk that the payer will close the bank account on which the check was drawn.

How Outstanding Checks Work

“Unreconciled items” are those checks and other transactions that do not have a statement date recorded. Items are posted to the selected bank account based on the check numbers and transaction dates selected. A list of the selected items can be printed before the update is confirmed. The payment goes on the general ledger, LLC Accounting: Everything You Need to Know but businesses must make adjustments during reconciliation, and they may need to reissue stale checks. It’s important to keep track of the amount of checks outstanding because they could be cashed at anytime. You may have had even cash in the account when you wrote the check, but a month later your account might be lower.

• When you write a personal check, you should record the date, check number, payee, and amount in your check register.
• This is very important because your bank balance will be higher than your available funds until the check clears the bank.
• The reconciliation process will identify these differences as due to outstanding checks.
• Someone else could be able to change the payee name or the amount if a check is misplaced or stolen before it is taken to the bank.
• Usually, you will print this report as part of your bank reconciliation before you begin clearing checks.
• The checks which have been written but have not cleared the bank are called outstanding checks.

The payor has no control over when the payee will cash or deposit the check. The only thing the payor can do, for a fee, is stop payment on the check. The payee cannot cash or deposit the check once a stop payment has been issued.The https://accounting-services.net/20-best-accounting-software-for-nonprofits-in-2023/ payer’s bank has no way of knowing that a check has been written until the payee deposits or cashes the check. Besides the liability it creates, the payor may forget that they wrote the check and spend money allocated for the check.

Keep Records

The reconciliation process will identify these differences as due to outstanding checks. These are checks that were issued in the regular course of DuPage County business and have not been cashed by the payee. The Treasurer’s Office continues to hold the funds pending issuance of replacement checks. Best practices for managing and clearing outstanding checks include regular bank statement reconciliation, promptly voiding or canceling unused checks, and maintaining proper record-keeping. Also, always maintain in communication with payees about payments not fully processed.