Electronic banking can provide real-time information about the total dollar amount of checks outstanding and the total dollar balance presently in the account. Inflated account balance happens when you write a check and the money never leaves your account, you may eventually think that you can spend those funds. Which means when they do deposit the check, you end up with less money than you expected. Unaccounted-for outstanding checks can disrupt the delicate balance of incoming and outgoing funds.

When Outstanding Check Turns Void

Businesses must track outstanding items to avoid breaking unclaimed property laws. If payments to employees or vendors remain uncashed, they eventually must turn over those assets to the state. This typically occurs after a few years, but timetables vary from state to state. When you pay someone by check, your payee must deposit or cash the check to collect the payment. The payee’s bank will request money from your bank, and the transaction concludes when your bank sends funds to the payee’s bank.

Outstanding Checks

By keeping track of every check you write and regularly cross-checking your records with your bank statement, you can avoid unnecessary delays, fees, and other budget pitfalls. A well-managed bank account is a stepping stone Certified Bookkeeper toward a secure financial future. You’ll want to take all reasonable steps to cash or deposit outstanding checks. If you wait too long, the check can go stale, and no longer be considered valid. If it has been more than six months, contact the issuer to resolve the matter.

Why are Outstanding Checks Important in Bank Reconciliation?

If they have the check, try to persuade them to deposit the check. If that doesn’t work, send a letter informing payees the check has not been presented and officially request they notify you if they have not received the payment. An outstanding check doesn’t cost anything beyond the paper it’s printed on. However, having to cancel or put a stop payment on a check can be costly. The payee will find the money didn’t arrive in their account, which could, in turn, even cause them to overdraft their own account.

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. Be proactive when writing checks and make sure to call or write if the payee doesn’t deposit the check. Send a letter informing the payees that the check has not been presented and request an official notification to make sure your check hasn’t gotten lost. Provided you maintain vigilance and embrace technology, you can handle outstanding checks with ease.

An outstanding check is a check payment that is written by someone, but has not been cashed or deposited by the payee. These checks can also be written by a company, but these checks have not yet cleared the bank account. In the U.S., outstanding checks are considered to be unclaimed property and the amounts must be turned over to the company’s respective state after several years. If that money is spent on something else, you may not have enough money in the bank account to cover all your promises to pay.

• Let us go through a few examples to understand these types of checks.
• If a check remains outstanding for an extended period, it may become stale-dated, and the bank may refuse to honor it.
• If not, the check could bounce and saddle you with additional fees.
• They are not tax efficient and an investor should consult with his/her tax advisor prior to investing.
• Of course, it’s best practice to deposit a check as soon as you receive it, which is why most checks include language encouraging a timely deposit.

As a result, the payee could get charged their own overdraft fees if they were counting on that money and spent it. If you do write a new check, it may be safest to request that the old one be returned or ask for proof that it’s been voided. Otherwise, in rare cases, you might wind up with both the old (outstanding) and the new check being cashed, which would leave you with a financial loss. Once you write a check or sign a check over to someone, the onus is on them to deposit the check.

Guide to Outstanding Checks

It may simply be that checks are not a good payment method for the payee. Inquire about other options, such as digital payments, that can take place quickly and reduce the chances of a payment being lost or expiring. Putting a stop payment on a misplaced or stale check may prevent issues down the road, especially if there’s a concern that it could fall into the wrong hands. However, this doesn’t always solve the problem, as it costs a fee to the payor and is only valid for a limited time. ✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score.

If the payee keeps any outstanding check for too long, then it runs the risk of getting void. Business owners know that outstanding checks might take weeks or months to get cashed. If a check remains outstanding for an extended period, it may become stale-dated, and the bank may refuse to honor it. The payee should contact the issuer to request a new check if this occurs. You can also call or write to remind the payee that the check is outstanding.

An outstanding check also refers to a check that has been presented to the bank but is bookkeeping and payroll services still in the bank’s check-clearing cycle. Outstanding checks refer to checks that have been issued by a company or individual but have not yet been presented to the bank for payment. These unpresented checks are still considered liabilities on the company’s or individual’s bank reconciliation statement until they are cleared from the account. Also, business owners must track their income, expenses and accounts payable as a part of their accounting. If they don’t do so and payments become outstanding, complications can begin to form.