If you receive a cashier’s check, look for a “void after X days” disclaimer and make sure you cash or deposit the check before then. If you discover an old cashier’s check, contact the issuing bank and ask them what they need from you to handle https://personal-accounting.org/accounting-for-tech-startups-what-you-need-to-know/ the transaction. Cashier’s checks are a type of “official check” and the rules surrounding them can be complicated. Some say cashier’s checks don’t expire, while others claim a cashier’s check is stale (out of date) after 60, 90, or 180 days.

• 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.
• You may have had even cash in the account when you wrote the check, but a month later your account might be lower.
• You can access GlobalBanks USA, our dedicated US account opening service, in just a few clicks.
• 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 you do not properly account for outstanding checks, you risk wasting the money for the check on something else. This may result in a “bounced check,” and your bank may charge you a “non-sufficient funds” (NSF) fee. It could also harm your relationship with the vendor or person to whom you provided the check. 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. It can be tricky to balance a checkbook and we have a worksheet with step-by-step instructions to help you.

What Is an Outstanding Check? Outstanding Checks 101

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. Businesses that mishandle these kinds of accounting situations are effectively in violation of the law.

If the payee informs you that they did not get your original check, stop payment on it to confirm they are not being dishonest. You can reissue a fresh check or another form of payment, such as a direct money transfer from your account to theirs after you are certain that the payee is being truthful. The latter option ensures that you will not have another outstanding check in the future. If the issuing entity postpones mailing the check for any reason, the check may also be delayed. Outstanding checks that remain so for a long period of time are known as stale checks. Outstanding checks also have the risk of being used in fraudulent conduct.

Bank Reconciliation Statement Template

They need to make a journal entry to write off the outstanding check by debiting cash at bank and credit accounts payable. The entry simply reverses back the original entry by increasing back the cash balance and accounts payable. When a company writes a check, the amount is deducted from the relevant general ledger cash account. If the monies have not been withdrawn or received by the payee, the balance in the company’s bank account will be overestimated and will be greater than the general ledger item. An outstanding check is a check payment that the issuing entity has recorded but has not yet cleared its bank account as a debit from its cash balance.

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. Below is a video explanation of the bank reconciliation concept and procedure, as well as an example to help you have a better grasp of the calculation of cash balance.

5 Cash, cash equivalents, and restricted cash

The payment goes on the general ledger, but businesses must make adjustments during reconciliation, and they may need to reissue stale checks. With banking activity becoming increasingly computerized, using the checking account’s online bill pay option is another approach to avoid writing a check and forgetting about it. This should offer real-time data on the overall dollar amount of checks outstanding as well as the total dollar balance in the account.

To prevent problems, you should cash or deposit a check promptly after receiving it. Like business checks, personal checks are generally considered invalid after six months (180 days). Outstanding personal checks can cause budgeting problems, but you may have an easier time reminding a friend or family member to cash a check than a business payee.

What Happens If a Check Is Outstanding for Too Long?

Cashier’s checks are backed by the issuing bank and, theoretically, should be valid for as long as the bank is in operation, but some banks will put expiration dates on the checks themselves. The Uniform Commercial Code (UCC) is a collection of laws and regulations meant to harmonize the laws of sales and regulations across the U.S. The UCC tells banks that they are under no obligation to accept personal or business checks that are older than 180 days (6 months). So, generally speaking, personal and business checks are good for 6 months; however, some banks will accept older checks. If an outstanding check of the previous month clears the bank, it means the bank paid the check and the check will appear as a deduction on the statement. Checks that have been outstanding for an extended period of time cannot be cashed because they have become void.

Ask the payee to return the old check before sending the new one to prevent the potential of both checks being deposited, either intentionally or unintentionally. If you wrote a check and it has been outstanding for a while, you may be wondering, “Do checks expire? ” They do expire and that’s The Best Guide to Bookkeeping for Nonprofits: How to Succeed Foundation Group why it’s important to record the date you wrote the check. In some cases, the company may credit expense when the supplier agree to waive the expense and provide free service. Below are two of the most common questions that we receive from people looking into what an outstanding check is.

Unclaimed Assets

From there, you can confirm whether or not the check has been processed. Alternatively, you can contact your bank directly with the check number and ask them to confirm. Lastly, you can contact the recipient of the check and ask them to confirm whether they have deposited or cashed the check. If you wrote someone a check and you’ve been waiting an unusual amount of time for it to be cashed, you may want to contact them to make sure the check hasn’t been stolen or lost. It could be difficult to cash a possibly expired cashier’s check or to get a replacement cashier’s check.