How To Handle Outstanding Checks In Payroll

what is an outstanding check

If a paycheck has been unclaimed for a long period of time, the payor must hand over the funds to the state in a process known as escheatment. Kylee07drg August 4, 2011 I am very meticulous about keeping up with any outstanding checks. Since the area where I live isn’t very technologically developed, I have to mail checks to pay my water bill and gas bill. 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 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.

Some banks will provide lists of uncashed checks, based on the numbers of checks that have cleared, on statements. People can match the numbers of uncashed checks against their own records to determine the total amount in outstanding checks. Institutions and businesses may contact people who have outstanding checks to confirm that the checks were received and that there are no problems. It may be necessary to void an outstanding check and issue a new one if a check was lost, stolen, or never received, for example. Payments that have not yet been deposited from customers make the checking account balance appear lower than it actually is. When a business receives a payment, an entry into the bank account's register will ensure the payment is not misplaced or forgotten.

Outstanding Checks are all un-cashed disbursements issued by the City over the past three years. Items more than three years old as of March 1st are moved to the City's unclaimed property account by July 1st of each year. Anthony Nguyen, founder of, has a passion for finding the best deals, bank promotions, credit card offers, cash back, points & miles, and everything in between. When writing checks, make sure to document your payments as they can help with future problems. If you’re interested in researching new banks, go through our posts aboutBest Bank Bonuses,Best Savings Account Rates, andBest Credit Card Bonuses. If you’re writing an check, make sure to have your payee deposit your check as soon as possible. Payees who don’t deposit their checks create an Outstanding Check, which can create an headache for your personal to business account.

What happens if a check is never cashed?

What are outstanding checks? Outstanding checks are checks that have not been deposited or cashed by the recipient. Because the recipient has not cashed the check, the payor still has the money in their account. The payor still owes the payee money, making the payment a liability.

Petty cash/imprest fund custodians are responsible for maintaining outstanding check lists for their respective accounts. Print the Outstanding Check List to view a list of general checks, accounts payable checks or trust checks that have not been cleared. You can print it by bank and for a specific date range, and you can choose whether to include check details for checks that were distributed to multiple clients/matters or general ledger accounts. If an employee tries to cash an expired paycheck, their bank can choose whether to cash it or not. An outstanding check is a check or demand deposit that has been authorized and written, but the payee has not cashed the check.

Is The Paycheck Expired?

The statement lists the cash and other deposits made into the checking account of the business. The statement also includes bank charges such as account servicing fees. Outstanding checks can also create discrepancies between your accounting books and bank account. To fix this, you will need to reconcile your bank account with your accounting books. After bank statement reconciliation, adjust your bank statement balance.

  • We have come to the end of the study on the outstanding checks, I hope you did enjoy reading it and you got the information you needed to know?
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  • To fix this, you will need to reconcile your bank account with your accounting books.
  • However, this is only a practical solution if you distrust the payee or if the amount is particularly large.
  • By doing this, however you must add deposits in transit, remove outstanding checks and add/deduct bank errors.

An outstanding check is still a liability for the payor who issued the check. Checks should be written in numerical order, according to the check number printed on the check.

Writing Another Check

Since deposits in transit have already been recorded in the company's books as cash receipts, they must be added to the bank statement balance. The Vector Management Group made a $3,000 deposit on the afternoon of April 30 that does not appear on the statement, so this deposit in transit is added to the bank statement balance. The ending balance on a bank statement almost never agrees with the balance in a company's corresponding general ledger account. After receiving the bank statement, therefore, the company prepares a bank reconciliation, which identifies each difference between the company's records and the bank's records. The normal differences identified in a bank reconciliation will be discussed separately. A bank reconciliation begins by showing the bank statement's ending balance and the company's balance in the cash account on the same date.

Although direct deposit, online bill payment, wires and electronic fund transfers are popular payment types, paper checks are still a viable option. When a check is created and disbursed, it becomes outstanding until it is drawn at the bank.

Why Checks Aren't Cashed

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. Interest income reported on the bank statement has usually not been accrued by the company and, therefore, must be added to the company's book balance on the bank reconciliation.

Oftentimes, a check may have been written by a company, recorded in the general ledger, but not yet shown on the company’s bank account statement. This is why your bank accounts need to be reconciled with the bank statement. There is a discrepancy between what your checkbook or accounting system says you have in your account and what the bank reports on your monthly statement. One of the main differences are the outstanding checks that have been recorded in the accounting system but haven’t been recorded by the bank. A common problem for the payer is keeping sufficient cash in a bank account to pay off all outstanding checks, since a few residual checks may not be cashed for a long time . A check previously recorded as part of a deposit may bounce because there are not sufficient funds in the issuer's checking account. The Vector Management Group's bank statement includes an NSF check for $345 from Hosta, Inc.

Steps To Manually Reconcile A Bank Statement

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Options include re-issuing the check, not re-issuing the check, etc. 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. Outstanding checks are checks that have not been deposited or cashed by the recipient. Because the recipient has not cashed the check, the payor still has the money in their account. The payor still owes the payee money, making the payment a liability. Some reconciling items require adjustments to the book balance with an actual entry and some do not.

Direct deposit can eliminate the whole ordeal of outstanding or unclaimed paychecks. When an employee takes too long to cash a paycheck, you might face bank account overdrafts. Forgetting about your uncashed liability can lead you to spend more money than you actually have. One way to combat potential bank overdrafts is by opening a separate payroll account. By separating payroll funds from general business funds, you can make sure you won’t touch extra money in your payroll account that is meant for paychecks. Outstanding checks can cause complications when the company goes to track their income, accounts payable and expenses.


Outstanding Interest Advances means, as of the last day of a Collection Period with respect to a Receivable, the portion of Outstanding Advances allocable to interest. Outstanding Debt means all the amounts, as adjusted from time to time, outstanding to the members of the CoC who will give their consent for approval of the Resolution Plan of the Successful Resolution Applicant. Outstanding Credits means, on any date of determination, the sum of the aggregate principal amount of all Advances outstanding on such date plus the LC Outstandings on such date. Outstanding check lists were not maintained to support the County's reconcil- iation, which resulted in an unreconciled variance of $275,628. Postdated checks will not display on the Outstanding Check List unless you print the report as of a date equal to or greater than the date on the check. Paychex support is here to help with online resources and responsive service professionals available via phone.

A check is a written, dated, and signed instrument that contains an unconditional order directing a bank to pay a definite sum of money to a payee. Checks that remain outstanding for long periods of time run the risk of becoming void. K.A. Francis is a freelance writer with over 20 years experience, and a small business consultant and jewelry designer. She holds a Bachelor of Arts in English and business administration and a Master of Arts in Adult Education. She has written for "The Einkwell," "Windsor Parent," MomsOnline, Writer's Stew, Lighthouse Venture Group and others. Her jewelry design company, KAF Creations, has been in operation since 1998. The automatic withdrawal requires a simple journal entry that debits utilities expense and credits cash for $253.

What are outstanding deposits?

An outstanding deposit is that amount of cash recorded by the receiving entity, but which has not yet been recorded by its bank. ... These deposits are subtracted from the book balance of the receiving entity to arrive at the bank balance.

Review the bank statement for any new debits or credits such as NSF debits, bank fees, etc. If I write a check at Wal-Mart, they immediately process the check and hand the check back to me. I know some people who have had insufficient fund charges because they were counting on more time before the funds actually came out of their account. Honeybees August 2, 2011 I like to keep a close watch on my checking account and will try to make sure it is balanced every week.

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. This non-editable field displays the total amount of outstanding checks, expressed in terms of the functional currency. This non-editable field displays the total amount of outstanding checks, expressed in terms of the transaction currency. Outstanding check and unclaimed property are reconciled and monitored as part of this monthly process. If you don’t report the unclaimed property to your state, you could face penalties. Make sure you establish procedures for dealing with unclaimed paychecks before these issues come up. If a paycheck goes unclaimed for a certain period of time, you need to file and report it to your state.

what is an outstanding check

Outstanding checks can wreak havoc on your time, the accuracy of your records, and even your finances. Interest Income is an increase in the bank balance for any interest earned on the account. Getting paid on Tuesday is helpful, because not only do I have less of a wait when I go during lunch break to deposit my check; I also can go grocery shopping during the week when the store is less crowded.

Enroll In Online Bill Pay

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. While a check is outstanding, the person who wrote it may consider the funds unavailable even though they still show up in his or her account. This is done to avoid an overdraft, where money is taken out and an outstanding check is cashed at the same time, causing a bank account to go into a negative balance.

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In May of each year, the city, as provided by the Government Code, begins the process of retiring outstanding checks that are 3 or more years old. A list of these checks is advertised in the local paper for 2 consecutive weeks and is then presented to the City Council. If the checks remain unclaimed what is an outstanding check for between 45 and 60 days after they are first advertised, they then become the property of the city and are transferred to the City's General, Water or Sewer Fund as appropriate. Each month the bank furnishes the University with a printout of outstanding checks on the payroll account.

what is an outstanding check

This presents a thorny situation—two checks might be circulating for a single payment. If the old check is deposited, your bank might honor it, and you could consequently end up paying double.

Banks use debit memoranda to notify companies about automatic withdrawals, and they use credit memoranda to notify companies about automatic deposits. To the bank, however, a company's checking account balance is a liability rather than an asset.

Unfortunately, outstanding checks can be a common problem and one of many complications for business owners. For example, a check may have been written and recorded by a company on December 31. However, due to the time necessary for the payee to receive and process the check, make a deposit, and the money to clear the banking system, this transaction will appear on the company’s January bank statement. The reconciliation process will identify these differences as due to outstanding checks.

It’s important to keep enough money in your account to cover all the outstanding checks at all times. Written checks that have not cleared the bank account make the account appear to have a larger balance than it actually has. Immediate entry of checks drawn from the account into the register and subtracted from the account balance eliminates much of the issue. If this step was skipped, entry at the time of reconciliation is required so the bank account reflects an accurate balance. Also, business owners must track their income, expenses and accounts payable as a part of their accounting.

Author: Nathan Davidson

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