An outstanding check is a valid check that has been written and presented to the payee, but not yet deposited or cleared. It can take several days from the time that a check is written to the time that the funds are deducted from the account of the person or company that issued it. There are several accounting measures used to track outstanding checks so that financial accounts can be kept accurate and up to date.
Once a check is written, the payee must take it to a bank to cash it or deposit it. Some payees do this immediately, while others may take their checks to the bank in batches. After a check enters a bank, it needs to be cleared. This includes processing at the payee’s bank and submitting the check to the drawee bank for payment. Electronic processing has streamlined this process considerably, and if the payee and payor bank at the same institution, a check may clear in a single day.
While a check is outstanding, the person who wrote it may consider the funds unavailable even though they still show up in his or her account. This is done to avoid an overdraft, where money is taken out and an outstanding check is cashed at the same time, causing a bank account to go into a negative balance. Checks can be written out in a transaction register with the amount being deducted immediately to keep track of how much money should be present in an account.
Some banks will provide lists of uncashed checks, based on the numbers of checks that have cleared, on statements. People can match the numbers of uncashed checks against their own records to determine the total amount in outstanding checks. Institutions and businesses may contact people who have outstanding checks to confirm that the checks were received and that there are no problems. It may be necessary to void an outstanding check and issue a new one if a check was lost, stolen, or never received, for example.
To avoid confusion, an outstanding check is usually void after a set period of time. Checks may be printed to indicate that they are void within 90 days or six months, or a bank may have a policy of not honoring checks older than six months. People who are not familiar with bank policy may want to ask before attempting to cash or deposit an old outstanding check. It may be necessary to ask for a new check to be issued.