Outstanding Check

What Is an Outstanding Check?

An outstanding check is a check payment that is written by somebody however has not been cashed or deposited by the payee. The payor is the entity who composes the check, while the payee is the person or institution to whom it is written. An outstanding check likewise alludes to a check that has been introduced to the bank however is still in the bank's check-going through cycle.

An outstanding check addresses a liability for the payor. The payor must make certain to keep sufficient money in the account to cover the amount of the outstanding check until it is cashed, which could require weeks or sometimes even months.

Checks that are outstanding for a long period of time are known as old checks.

How Outstanding Checks Work

One of the approaches to making payment for a transaction is with a money order. A check is a financial instrument that approves a bank to transfer funds from the payor's account to the payee's account. At the point when the payee deposits the check at a bank, it demands the funds from the payor's bank, which, thus, pulls out the amount from the payor's account and transfers it to the payee's bank. At the point when the bank gets the full amount mentioned, it deposits it into the payee's account.

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 show up on the statement toward the month's end. Since the check is outstanding, this means it is as yet a liability for the payor. When the payee deposits the check, it is accommodated against the payor's records.

Checks that stay outstanding for long periods of time can't be cashed as they become void. A few checks become old whenever dated following 60 or 90 days, while others become void following six months.

Outstanding checks that remain so for a long period of time are known as lifeless checks.

Risks and Outstanding Checks

In the event that the payee doesn't deposit the check right away, it turns into an outstanding check. This means the balance stays in the payor's account. In the event that the payor doesn't keep track of his account, he may not realize the check hasn't been cashed. This might introduce the false idea that there is more money in the account accessible to be spent than there ought to be. If the payor goes through some or the money that ought to have been all held in reserve to cover the check and afterward said check is subsequently cleared, the account winds up in the red. At the point when this occurs, the payor will be charged a overdraft or non-adequate funds (NSF) fee by the bank, except if the account has overdraft protection.

Instructions to Avoid Outstanding Checks

Failed to remember outstanding checks are a common source of bank overdrafts. One method for avoiding this occurrence is to keep a balanced checkbook. This can assist with preventing any superfluous NSFs in the event that the payee chooses to cash the check sometime in the future.

You can likewise call or write to remind the payee that the check is outstanding. This might urge them to deposit or cash the check. In the event that they haven't received the payment, this might prod them to tell you to reissue the check.

With banking activity turning out to be progressively electronic, one more method for avoiding composing a check and overlooking it is to utilize the checking account's online bill pay service. This ought to give real-time data about the total dollar amount of checks outstanding and the total dollar balance present in the account.

Outstanding Business Checks

At the point when a business composes a check, it deducts the amount from the proper general ledger cash account. On the off chance that the funds have not been removed or cashed by the payee, the company's bank account will be overstated and have a bigger balance than the overall ledger entry. To accommodate the bank statement so the company's cash account in its financial statements is predictable with the cash in its bank account, the company must change its "balance per bank," which alludes to the ending cash balance on a bank statement.

As businesses need to submit to the unclaimed property laws, any checks that have been outstanding for quite a while must be dispatched to the state as unclaimed property.

Features

• Checks that stay outstanding for long periods of time run the risk of becoming void.
• An outstanding check is a financial instrument that has not yet been deposited or cashed by the beneficiary.
• An outstanding check is as yet a liability for the payor who issued the check.