What Is the Meaning of Outstanding Checks and Their Financial Impact?

By consolidating all the information in one place, you can quickly identify outstanding checks that require attention and take prompt action, mitigating compliance risks. At Eisen, we are committed to simplifying the escheatment process for financial institutions. Our Escheatment Hub automates key aspects of managing outstanding checks, ensuring effortless and reliable compliance. Here are some of the features that make Eisen an invaluable partner in your compliance efforts. The first step is to identify all checks issued accurately but remain uncashed or unclaimed.

• So, you’ve made all necessary attempts to reach the payee, completed due diligence, and filed reports.
• The company recorded this check in its books, reducing its cash balance by $500.
• 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.
• This is particularly critical for payroll checks, where labor laws mandate timely payment to employees.
• This should provide real-time information about the total dollar amount of checks outstanding and the total dollar balance present in the account.
• The company must record these transfers in its general ledger accounts.

How to Handle Outstanding Checks?

Also, business owners must track their income, expenses and accounts payable as outstanding checks a part of their accounting. If they don’t do so and payments become outstanding, complications can begin to form. Any mishandling that businesses do in terms of their accounting and checks can be in violation of the law. Skip the paper chase and embrace the digital age with electronic payments – because nothing says ‘I’m modern’ like avoiding outstanding checks. It’s important to note that any failure or delay in addressing issues related to outstanding checks can exacerbate existing legal risks.

Helpful Tip for Bank Reconciliation Adjustments

• These roadblocks not only hinder the reconciliation process but can also have broader implications for financial reporting and cash flow management.
• They meticulously scrutinize these items during the year-end audit to ensure the company’s financial statements accurately reflect its financial health.
• For example, voiding a check without notifying the payee could result in claims for non-payment.
• This transaction results in the bank’s assets decreasing by $1,000 and its liabilities decreasing by $1,000.
• The payor is the entity who writes the check, while the payee is the person or institution to whom it is written.
• This may eliminate the accounting entries and the need to report and remit the outstanding check amounts to your state government years later.

If a check was issued to you and it’s still outstanding after six months, contact the check issuer and request a replacement. As mentioned above, you may need to return the original check or sign documents confirming the check is lost or destroyed. If you cannot find the issuer, consult your state’s abandoned property program to claim assets. If you write a check and the money never leaves your account, you may develop the false belief you can spend those funds, but the money still belongs to the payee.

Comparing Accounting: Bank vs. Company

Electronic banking can provide real-time information about the total dollar amount of checks outstanding and the total dollar balance presently in the account. Inflated account balance happens when you write a check and the money never leaves your account, you may eventually think that you can spend those funds. Which means when they do deposit the check, you end up with less money than you expected. An unpresented cheque is a check that a company has written, but the check has not yet been paid by the bank on which it is drawn. An unpresented check is also referred to as an outstanding check or a check that has not yet cleared the bank. During retained earnings the period of a check’s issuance and clearance, it is considered outstanding.

Since the outstanding checks are not yet in the bank’s records/bank statement, the company’s bank reconciliation will show the outstanding checks as a subtraction from the balance per bank. If an outstanding check is not cleared within a reasonable amount of time, it can result in inaccurate account balances, legal disputes, and even criminal charges for fraud or theft. It is important to regularly monitor your account and reconcile any outstanding checks to avoid these potential risks. Unclaimed property obligations add another layer Coffee Shop Accounting of complexity to managing outstanding checks. State-specific escheatment laws require businesses to report and remit unclaimed financial assets, such as uncashed checks, after a set dormancy period. While the Uniform Unclaimed Property Act provides a general framework, the specifics, such as dormancy periods, vary by state.