What Is an Outstanding Check? Everything You Need to Know Explained Simply
Checks that remain uncashed for long periods of time are called stale checks. This period can range from 60 days to six months.Sometimes a payee forgets about the check or loses it https://www.bookstime.com/ without notifying the payor. 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.
Avoiding Outstanding Checks
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. An outstanding check is a check that a recipient fails to deposit.
- Outstanding checks are common for business owners and individuals.
- • One of the major ones is that it bounces by the time an attempt is made to deposit it.
- In other words, the person or company that issued the check is still waiting for the value of the check to be withdrawn from their account.
- If the payee finally deposits the check after months of delay, you risk overdrawing your account and bouncing the check.
Why You Can Trust Finance Strategists
In recent years, physical paychecks have given way to direct deposit systems and other forms of electronic transfer. While not all checks look alike, they generally share the same key features. The name and contact information of the person writing the check is located at the top left.
Benefits of Outstanding Checks
If it has been more than six months, contact the issuer to resolve the matter. If the sticking point is that you don’t have an account into which you can deposit the check, you can easily open a checking account. An overdraft occurs when the account holder who wrote a check that is still pending does not have enough money in their account to cover the amount of the check when it is eventually submitted for payment. An outstanding check represents a payment that has been written but not yet cleared by the bank. In a double-entry accounting system, an outstanding check is considered a credit for the check writer, since credits record outgoing money.
Ask a Financial Professional Any Question
If you wrote a check that is outstanding for more than a few weeks, there are steps you can take to resolve the situation. First, know that outstanding checks expire, often after six months, but sometimes as quickly as 30 or 60 days. Knowing how to stop payment on a check is useful as well if you wish to void an outstanding check (more on this below).
If the Check Is Less Than Six Months Old
When a check is issued to a creditor or third party, it is immediately recorded in the bank column on the credit side of the cash book. An unpresented check (or outstanding check) is a check that has been issued or drawn by the depositor but not presented to the bank for payment until the date that the bank statement is issued. If you forget about the outstanding check and spend money based on the present bank balance, it can lead to financial miscalculations. • You may wind up being charged overdraft fees and non-sufficient funds (NSF) fees if the outstanding check is deposited and then bounces. To remedy these situations quickly, be proactive with outstanding checks. After all, you still owe the money, and you’ll have to pay it sooner or later.
Adjust the Cash Account
This process involves aligning your bank statement with your records to ensure accuracy. Outstanding checks can create outstanding checks discrepancies, complicating reconciliation. An outstanding check is a check that a payee has not deposited or cashed.
- If a check is outstanding for less than six months, you generally don’t want to write a new one.
- An outstanding check represents a payment that has been written but not yet cleared by the bank.
- Qualifying accounts can even access their paycheck up to two days early.
- These checks can pose risks such as overdrawing the account, potential fraud, accounting discrepancies, and delayed financial reporting.
- If they haven’t received the payment, this may nudge them to notify you to reissue the check.
Outstanding Checks: What They Are and Why They Matter
Which side of the cash book is credited when an unpresented check is issued?
- At first glance, this may seem like a positive turn of events for the payer.
- As such, there is no incentive to wish for an outstanding check to permanently never be cashed as the payment is subsequently owed to the government for holding.
- Outstanding checks that remain so for a long period of time are known as stale checks.
- For individuals, the risk lies in overspending and the potential for overdraft fees should the outstanding check be presented for payment unexpectedly.
- The main difference between outstanding checks and outstanding deposits is that a check takes money from your bank account while a deposit puts money into your bank account.