You can ask if they’re willing to deduct the stop payment fee from the original amount. If the outstanding check is less than six months old, you should not write another check. It’s fine to contact the recipient after a few weeks to find out if they’ve lost the check or when they plan on cashing it. If they can’t get to the bank, you may want to ask them to return the check to you and you can pay them using another method. Balancing your checkbook is akin to what professional accountants do during reconciliation. It’s a way of making sure that you and your bank agree about your account balance and available funds.
Checks that are outstanding for a long period of time are known as stale checks. 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. Therefore, rather than allowing checks to become stale and then remitting the amounts to a state government, companies should contact the payees of any checks that have been outstanding for several months. An outstanding check is a check that a company has issued and recorded in its general ledger accounts, but the check has not yet cleared the bank account on which it is drawn.
Terms Similar to Outstanding Check
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. An outstanding check is a check payment that is written by someone but has not been cashed or deposited by the payee. The payor is the entity who writes the check, while the payee is the person or institution to whom it is written. An outstanding check also refers to a check that has been presented to the bank but is still in the bank’s check-clearing cycle. A check is a financial instrument that authorizes a bank to transfer funds from the payor’s account to the payee’s account. When the payee deposits the check at a bank, it requests the funds from the payor’s bank, which, in turn, withdraws the amount from the payor’s account and transfers it to the payee’s bank.
Last, outstanding checks might have an impact on management of the cash flow. If a corporation has a substantial number of checks that have not yet been cashed, it may create ambiguity over the amount of cash that is available, making it difficult to efficiently plan for and manage expenses. 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. If so, the payee will need to receive a replacement payment from the payer. 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.
- All else being equal, it is safest if a check is deposited as fast as possible to avoid tampering with the instrument.
- Make sure that payees have access to the right contact information so that they can get in touch with you or your designated representative regarding any questions, issues, or changes relating to the overdue 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.
- 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.
- There are actually some benefits to have checks outstanding as well, though.
- These checks can pose risks such as overdrawing the account, potential fraud, accounting discrepancies, and delayed financial reporting.
” They do expire and that’s why it’s important to record the date you wrote the check. Make sure that payees have access to the right contact information so that they can get in touch with you or your designated representative regarding any questions, issues, or changes relating to the overdue check. Check to see that the contact information is correct, as checks may go missing simply because of an incorrect mailing address. Outstanding checks aren’t necessarily inherently bad; however, there are some risks and downsides to have checks linger. Huntington is here to help you understand the differences between a checking and a savings account and how both could help you manage your finances.
What is an Outstanding Check?
An outstanding check represents a check that hasn’t been cashed or deposited by the recipient or payee. One state is that the payee has the check but hasn’t deposited or cashed it. The other state is that the check has not yet reached the recipient and is still in the payor’s bank-clearing cycle.An outstanding check is a liability for the person (i.e., payor) who has written the check. They must make sure that enough money remains in their checking account to cover the check until it is paid. The payee may cash the check immediately or might hold onto it for months.
There are actually some benefits to have checks outstanding as well, though. Writing checks makes it possible for organizations and individuals to make payments without requiring instantaneous cash or electronic transactions to be completed. Checks that linger only buy the company more time to gather up enough resources for payment to clear if more time is needed. There is typically a multi-day period between when a check is created and when it is presented for payment, which is caused by the time required for the postal service to deliver the check, as well as for the payee to deposit it. The check may also be delayed if the issuing entity puts off mailing the check for any reason. It is imperative for an issuer to provide payees with timely communication regarding the issuance of a check as well as any pertinent details as soon as possible.
Risks of Outstanding Checks
When the bank receives the full amount requested, it deposits it into the payee’s account. 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 present in the account. Outstanding checks that remain so for a long period of time are known as stale checks.
How Outstanding Checks Work
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 without notifying the payor. The payor has no control over when the payee will cash or deposit the check. 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. Besides the liability it creates, the payor may forget that they wrote the check and spend money allocated for the check. When the payee cashes the check, and their bank tries to pull funds from the payor’s account, the payor will get hit with an overdraft or non-sufficient funds (NSF) fee.
Definition of Outstanding Check
Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Realized is a subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.