If you are planning on writing an check, be sure to read this guide on how to avoid outstanding checks; You must be proactive on having your payee deposit your cash. If they don’t, then your check could possibly become an Outstanding Check which can complicate things such as create an inflated account balance, unclaimed assets and business.
If you are running a business, make sure to try your best to avoid these kinds of checks. If you’re interested in learning why these kinds of checks can cause problems to your account, read on.
What is an Outstanding Check?
An outstanding check, also known as an un-cleared check, is written and recorded in the depositors accounting system but hasn’t been paid by the bank before the statement date. In other words, an outstanding check is one that was written but not cashed before the end of a statement period. It’s still out there waiting to be cashed and drawn out of your checking account. These generally do not appear on the monthly bank statement because they haven’t been paid from the account as of the statement date.
An outstanding check remains a liability of the payer until such time as the payee presents the check for payment, which then eliminates the liability. If the payee never presents the check for payment, the payer can mark the check as void in its accounting system, which usually marks the original account payable as unpaid, and also increases the balance in the cash account by the amount of the outstanding check that is now being voided.
How Outstanding Checks Work
A check becomes outstanding when the payee doesn’t cash or deposit the check. This means it doesn’t clear the payor’s bank account and doesn’t appear on the statement at the end of the month. Since the check is outstanding, this means it is still a liability for the payor. Once the payee deposits the check, it is reconciled against the payor’s records.
Checks that remain outstanding for long periods of time cannot be cashed as they become void. Some checks become stale dated after 60 or 90 days, while others become void after six months.
What to do with Outstanding Checks
Make sure to be proactive when writing checks and make sure to call or write if the payee doesn’t deposit the check. You can also 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.
In addition, make sure that you keep records and document communication in order to prove to state regulators that you made reasonable attempts to complete the payment if needed.
Consider online payment if you want to avoid Outstanding Checks altogether. With online payment, the bank deducts funds from your checking account when the check is printed. As a safety precaution, your funds will return to your account if the payee does not deposit the check with a certain period of time, usually within six months.
How to Avoid Outstanding Checks
Forgotten outstanding checks are a common source of bank overdrafts. One way to avoid this occurrence is to maintain a balanced checkbook. This can help prevent any unnecessary NSFs if the payee decides to cash the check at a later date.
You can also call or write to remind the payee that the check is outstanding. This may encourage them to deposit or cash the check. If they haven’t received the payment, this may nudge them to notify you to reissue the check.
With banking activity becoming increasingly electronic, another way to avoid writing a check and forgetting about it is to use the checking account’s online bill pay service. This should provide real-time information about the total dollar amount of checks outstanding and the total dollar balance presently in the account.
Writing Another Check
If your payee has requested to have another check for any reason, make sure that you ask for the old check back. If they are unable to provide the old check, you might want to consider asking you bank for a “stop payment” on the old check. Unfortunately, stop payment requests cost money, and they only last for six months which means you may have to repeat the process.
Additionally, you can also ask your payee to sign a document not to deposit both checks. Though it won’t necessarily stop them from depositing the extra check, it adds a reminder and paper trail that will be useful.
Author’s Verdict
After reading this post about outstanding checks, we hope you gained valuable information. Applying the information you’ve gained from this post, you should be able to avoid having outstanding checks and what to do with them if you have them.
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