What is an outstanding check?

outstanding check definition

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. When the bank receives the full amount requested, it deposits it into the payee’s account. Before sending one, ask the payee to return the old check to eliminate the possibility of both checks being deposited, either intentionally or unintentionally.

Business owners know that outstanding checks might take weeks or months to get cashed. This documentation will come in handy if you need to prove to state regulators that you made reasonable attempts to complete the payment. If an outstanding check is cashed after you asked a bank to stop the payment, you will be responsible for proving that you took the necessary steps to complete the payment.


The payee may cash the check immediately or might hold onto it for months. 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 outstanding check definition 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.The payer’s bank has no way of knowing that a check has been written until the payee deposits or cashes the check.

Different checks are designed for different purposes and for different risk levels. Learning how to use a check correctly can provide you with a secure payment method that you may need or prefer to use in certain circumstances. Other checking account fees can include a monthly service fee, a per-check fee (a charge for every check you write), a check printing fee, and returned deposit item fee. A returned deposit item fee is a fee charged when you deposit a check in your account that bounces. Don't let fear of missing out on compliance requirements drive your organization's financial processes into dangerous territory.

Outstanding check definition

In the bank reconciliation, outstanding checks are deducted from the balance per bank. •   In business bank accounts, outstanding checks can cause hiccups in accounting if not tracked well. You can tell if a check is outstanding by reviewing your online bank account. Alternatively, you can contact your bank directly with the check number and ask them to confirm.

By promptly reconciling accounts manually or by utilizing accounting software monitoring tools like Quickbooks allows early identification of suspicious transactions and possible fraud attempts. Due to the risks posed by outstanding checks, one can take steps to prevent them from occurring. One can track their outstanding checks and ensure payment as soon as possible. This way, they can keep their accounting records up-to-date and minimize complications related to these checks. Also, one can communicate with the recipient of the check to see if they have any issues with the check, say if the amount is incorrect.

Outstanding Check Definition & Ways to Avoid

In conclusion, a proactive approach to managing outstanding checks is essential for businesses to maintain accurate financial records and ensure smooth cash flow. Adhering to these practices enhances financial control and transparency, reduces errors, and promotes efficient cash flow management. By implementing these best practices, businesses can effectively manage outstanding checks, maintain accurate financial records, and ensure smooth cash flow. Outstanding checks refer to checks issued by a company that have not yet been presented to the bank for payment.

  • An outstanding check refers to a check that has not yet been deposited or cashed by the recipient.
  • An outstanding check remains a liability of the payer until such time as the payee presents the check for payment, which then eliminates the liability.
  • A few years ago, an international scam involving over $25 million worth of uncashed cheques that were supposedly meant for Nigerian pensioners gained public attention.
  • Instead, the amount for which the check is written is a substitute for physical currency of the same amount.
  • This compensation may impact how and where products appear on this site (including, for example, the order in which they appear), with exception for mortgage and home lending related products.

When you ask them how they want to be paid, try suggesting a money order, cashier’s check, or cash. You can ask if they’re willing to deduct the stop payment fee from the original amount. In addition to timing differences, outstanding checks can also arise from errors, such as when a check is lost or misplaced before it can be deposited.

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