3 Ways to Tell a Check is Outstanding

Today, you’ll learn how to tell if a check is outstanding.

There are three possible ways outstanding checks are determined. First of all, the three methods discussed below start from the most basic to the more complex. From the basic, it begins with an issued check example into all issued checks are reconciled.

A bank reconciliation statement/report, unless all issued checks are cleared, generally has outstanding checks. However, an end-user may find the report confusing. For instance, is the outstanding check really outstanding? The question is often asked because the users and the report have not met before.

Bank recon reconcilers, often, could not understand how the outstanding checks are determined. For new reconcilers, this usually happens. What to do for them is absolutely confusing. For instance, the methods of reconciliation could be manual. Each issued check could be processed manually. This method should take more time.  

To help the end-users and reconcilers, the three methods below, to tell if a check is outstanding, are discussed in detail:

1. As shown in a month-end bank statement, see if a check is not yet debited.

If a check is disbursed but not yet cleared in the month-end bank statement, it is still outstanding. For instance, select an issued check number and in the bank statement(s), look for it. The check release month and the prior month’s bank statement should be the beginning. Sometimes, within the ensuing months, the check normally clears. After the payee deposits the check in the bank, the disbursed amount is credited and becomes non-outstanding. This occurs because the check’s recipient’s immediate deposit to the bank is usually normal.

Generally, the deposit of check receipts as soon as possible should happen. Conversely, the outstanding check, for a longer period could still remain. The period is probably two to six months. It might be possible because of undeposited checks, recording errors, lost checks, and forgotten checks. For recording errors, the needed action should be an adjusting entry. Sometimes, the check recorded in another bank account is the culprit.

Also, sometimes an outstanding check becomes stale. The check becomes stale when the check for more than six months remains uncleared. An adjusting entry in the accounting records is required. For instance, in the cash balance, the cash amount of a stale check is added back.

2. Select an outstanding check from the bank reconciliation statement and see if in the bank statement balance the check was deducted.

Previously, only one check, to determine whether outstanding was reviewed. The second method compared to method number one is more difficult and advanced. This time, bank reconciliation is being reviewed.

When reviewing a bank reconciliation statement, choose one or more outstanding checks and verify if the checks have cleared. Take note of the check numbers and amounts. They are used as references.

On a bank statement and its balance,  an outstanding check is not yet debited or deducted. However, the check is not outstanding anymore if the bank balance is already deducted by its amount. In this case, the payee’s account is already credited.  Hence, the transfer of cash from the issuer to the recipient is already completed.

3. Reconcile all check disbursements with the bank statement.

The third method compared to the previous methods is more time-consuming and tedious. This method of determining outstanding checks is a full-scale reconciliation. It is used when the bank reconciliation is untrustworthy. Meaning, that the errors might be enormous. Method no. two have one job which is to test. However, if there are several inaccuracies, full reconciliation is probably required.

To verify the outstanding checks, it is required that both the bank statements and checks issued are completely reconciled. First of all, both the bank statement debits and all checks issued should be compared and matched. The previous month’s outstanding checks should also be included. They are required or else the bank reconciliation statement will be unbalanced. For instance, the previous month’s still uncleared checks and the current month’s outstanding checks are combined.

Next, all unmatched checks are obviously outstanding checks. They remain on the bank reconciliation statement unless in the bank statement they are already cleared.

The verification can be done in Excel and with its VLOOKUP function. For instance, to find the check value from the bank statement, using the Excel function, the check number is used. The reconciliation could start by comparing the accounting record with the bank statement and then vice versa.  

Next, to identify errors the differences between the accounting records and the bank statement are calculated. The errors in recording are identified and the reasons should be determined. The causes will be the basis of the adjusting entries.

However, on the third method, all checks are reconciled. For instance, the time it takes is longer. The execution requires good reconciling skills.